Advantage and Disadvantage of Public Limited Company Registration

Do you have an urge to build a Company, but clueless which business model to choose? Often, budding entrepreneurs get perplexed while picking the right structure for their business. The root cause of confusion lies in choosing between Private Limited Company and Public Limited Company. As both Company structures enable limited liability, it further creates indecisiveness. Are you still worried? This write-up will highlight the advantage and disadvantage of Public Limited Company Registration. Thus, it will help you make the best decision that fits well to your venture needs.

What is a Public Limited Company?

A Public Limited Company or PLC is the business entity that either trades its securities in the stock market or offers its shares to the public.  PLC raises a substantial amount of funds through Public Issue of Shares. The reason behind the popularity of a Public Limited Company in India is that it is easy to incorporate. A Public Limited Company can be formed with a minimum 3 Directors and 7 Shareholders along with a Registered Office. Some of the fundamental features of a Public Limited Company which precisely defines its nature are:

• Limited Liability: The suffix of a PLC says limited liability which means that in case the Company incurs losses; its shareholders are legally liable to repay the debts only to the extent of the nominal value of their shares.
• Least value of Paid-Up Capital: Public Limited Companies must possess a minimum Paid-Up Capital of INR 5 Lakh or a higher amount as per the amendments made.
•  Number of members: It requires at least seven members to register a Public Limited Company while there is no maximum limit on the members under Companies Act, 2013.
• Perpetual succession: Public Limited Company has a separate identity in the eyes of the law. It implies that a PLC shall keep on existing regardless of death, insanity, insolvency or bankruptcy of its members.
• Name of the Company: All the Public Limited Companies must add ‘Ltd.’ at the end of their names.

These traits not only impart knowledge about the nature of PLC but also notify the advantage and disadvantage of Public Limited Company Registration.

Conditions to Register a Public Limited Company

Companies Act, 2013 has set some conditions for Public Limited Company Registration which are as follows:

• Ensure to have a minimum Paid-Up capital of INR 5Lakh before starting a Public Limited Company in India.

• It is indispensable that one among the two Directors of the proposed PLC is a resident of India.

• A proposed Public Limited Company must have seven individuals for the position of shareholders. As per Companies Act, 2013^[1], there is no limit on the maximum number of shareholders, yet Directors can’t exceed the limit of 15.

• The applicant must ensure that the name of his proposed PLC is unique and do not resemble any of the existing Public Limited Companies. Thus, it is better to check the name availability on MCA portal.

Procedure for Public Limited Company Registration in India 

The steps are given below which are required for Registration of a Public Limited Company:

• Obtain DSC and DIN: Fill the Company’s Incorporation Form on the official website of MCA. Therefore acquire (Digital Signature Certificate) DSC for DIN Application.
• Approval of Company’s Name: Now is the time to apply the e-Form RUN to check the name’s availability for your Public Limited Company. An applicant can propose two names in preferential order and submit the prescribed fees of INR 1000.
• File the Incorporation Form: After obtaining the name approval; it’s time to file an Application in Form SPICE 32 for the incorporation of PLC. Affix all the essential documents with your Application such as ID proof, PAN Card, residential proof of the proposed office, Memorandum of Association, Article of Association etc.
• PAN, TAN and Bank Account Application: Once you obtain CIN (Certificate of Incorporation), apply for PAN, TAN and Bank Account opening to execute daily operations.

Advantage and Disadvantage of Public Limited Company Registration

Like a blessing comes with a disguised curse; similarly, there are some advantages and disadvantages of registering a Public Limited Company. Thus, let’s look at the pros and cons of Public Limited Company Registration individually:

Advantages of Public Limited Company Registration

Advantages of Public Limited Company Registration follow as:

• Steady Business Growth: Private Limited Companies can adapt tech-driven techniques and expand their business rapidly with the accessibility to an adequate amount of capital.
• Raise Capital through Issue of Shares: Insufficiency of capital is inevitable while running a business, but a Public Limited Company has the option to raise capital by the public issue of Shares, unlike a Private Limited Company.
• Funds are easily Transferable: The Shares of a PLC can be transferred easily. Since the stocks of a Public Limited Company are listed on stock exchange, it drives more potential shareholders.
• Access to additional Funding: Banks and financial institutions generally render credit/ loans to Public Limited Companies at favorable interest rates. Moreover, the authority lies in hands of PLC to negotiate the terms of conditions for loan repayment.

Disadvantages of Public Limited Company Registration

Disadvantages of Public Limited Company Registration follow as:

• Higher Paid-Up Capital: The formation cost of a Public Limited Company is much higher (INR 5 Lakh) in contrast to a Private Limited Company (INR 1 Lakh).
• More Stringent Regulations: A PLC has to comply with several statutory regulations. Such legal norms are set to safeguard the interest of the Company’s shareholders.
• Transparent Dealing is Required: Since Public Limited Companies issue their Shares to the public, so they are required to disclose complete information about their potential growth and business operations. PLC does not have any privacy and cannot hide anything; even their account details receive media coverage.

Conclusion

Read our article:How to Start a Public Limited Company in India?