How to Start a Public Limited Company in India?
Public Limited Company abbreviated as PLC is the business entity which offers its shares to the public or whose securities are traded in the stock market. Such companies get access to substantial capital through the public issue of shares. Minimum three Directors, seven shareholders and a registered office are required to incorporate a Public Limited Company in India. In a Public Limited Company, the members have to follow strict compliances as compared to a Private Limited Company. If you also want to start a Public Limited Company, then you have landed on the right platform. This piece of information will give comprehensive knowledge about the procedure, eligibility, documents required for Public Limited Company Registration.
Key Characteristics of Public Limited Company
These are some fundamental traits of a Public Limited Company which clearly defines the nature of this business model:
- Limited Liability– All the members or shareholders of a Public Limited Company has to bear a limited liability. It implies that if a company incurs losses under any circumstances, then its shareholders are liable to pay the debts in correspondence to the nominal value of their shares.
- Total Number of Members– It requires a minimum of 7 members to establish a Public Limited Company in India. There is no limit on the maximum number of members under the provisions of Companies Act, 2013.
- Minimum Paid-up Capital– A Public Limited Company must have a minimum Paid-Up Capital of INR 5,00,000 or a higher amount which is amended from time to time.
- Company Name- It is essential to add “Ltd” in the suffix of every Public Limited company’s name.
- Perpetual Succession- Public Limited Companies are separate legal entities from their members. PLCs keep on existing in the eyes of the law irrespective of death, bankruptcy, insanity or insolvency of its members. It results in the perpetual succession of the company.
Pros & Cons of Public Limited Company Registration
Before undertaking a business venture, one must apprehend the benefits and challenges related to it. Therefore, it is prudent to understand both the pros and cons of having a Public Limited Company in India.
Advantages of Public Limited Company
Here are the perks that a Public Limited Company avails through Registration:
- Raise Capital by Public Issue of Shares– A Public Limited Company can quickly raise capital through the issue of shares to the public. Thereby it can accumulate a large sum of money than a Private Limited Company.
- Additional Sources of Finance– Being listed on a recognized stock exchange helps Public Limited Companies to expand their financial opportunities. Banks or other financial institutions usually volunteer to facilitate Public Limited Companies in terms of loan/credit services. Moreover, PLCs can even negotiate favorable interest rates and conditions for repayment of loans.
- Easy Transfer of Shares- The shares of Public Limited Companies are easily transferable. As the stock of a PLC is quoted on the stock exchange, it tends to attract more potential shareholders.
- Rapid Growth of Business– Since a Public Limited Company has adequate capital; it can seamlessly run business operations and adapt the latest innovation techniques for further expansion.
Challenges faced by a Public Limited Company
Following are the possible challenges that members of a Public Limited Company may face:
- Multiple Statutory Regulations- Unlike the case with Private Limited Company, there are various legal and regulatory norms in a Public Limited Company. It is a daunting task to register as a Public Limited Company in India without professional assistance as one has to meet several compliances.
- Stipulation to Maintain Transparency- All PLCs have to disclose detailed information of their business operations and performance, which then gets circulated to the public. Such companies cannot hide anything; even their accounts often receive more media coverage.
- Vulnerable to Hostile Takeovers- If a large number of shareholders agree to a bid, there are chances of the Hostile takeover of a Public Limited Company.
- Higher Financial Commitment– The formation cost of a PLC is much higher because of complex Registration prerequisites.
Following is the list of prerequisites that an individual must fulfill before applying for Public Limited Company Registration:
- Unique Company’s Name– It is essential to ensure that your company’s name does not resemble any other existing Public Limited Company. Therefore, you must validate the Trademark Registration to assure that the name of your company is unique.
- Capital Requirement– A minimum INR 5Lakh is required to start a Public Limited Company in India.
- Director Residency– One amongst the two directors of a PLC must be a resident of India. It means that a Director must have stayed in India for at least 182 days during the previous financial year regardless of its citizenship.
- At Least Seven Shareholders– For Public Limited Company Registration, a company must have at least seven people, who shall act as the company’s shareholders. Besides, there is no maximum limit on the total number of shareholders; a PLC can’t exceed the limit of 15 Directors.
Documentation plays a pivotal role in the Registration process of a Public Limited Company. Affix these recent and valid documents with your application:
- Two passport-sized photographs of Directors
- Identification proof of the Directors and shareholders
- PAN Card of each Director and shareholder
- Residential proof of the proposed office (Water Bill, Utility Bill, Rental Agreement etc.)
- NOC (No Objection Certificate) from the landlord where the office is situated
- DIN and DSC of all Directors
- Memorandum of Association (MOA) & Article of Association (AOA)
Steps to establish a Public Limited Company in India
Follow the simple steps given below to register a Public Limited Company online:
- Acquire DSC and DIN- To fill the company incorporation form on the official MCA portal, the applicant must first obtain DSC followed by proceeds for DIN application.
- Name Approval– The next step is to procure name approval by applying in e-Form RUN and check the name’s availability. At this stage, a company can propose two names along with the prescribed fees of INR 1000.
- Filling Incorporation Form– Now fill-up one single application in Form SPICE 32 for the incorporation of Public company and attach all the necessary documents.
- PAN, TAN and Bank Account Application– Once the new Public Limited Company obtains Certificate of Incorporation, one can apply for PAN & TAN and Bank Account opening.
If you want to build a Public Limited Company, seek the guidance of Swarit Advisors which is your trusted legal partner.