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Public Limited Incorporation

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What is a Public Limited Incorporation?

Public limited incorporation is a company whose shares are traded on a public stock exchange. A person registering public limited incorporation must understand the difference between public limited incorporation and private limited incorporation. To raise funds, shares are listed on the stock exchange.

A primary offering is the first time a business offers shares on a stock exchange. Depending on the circumstances, public corporations can choose to make secondary offerings. These offers, however, can only be made to a specific class of shareholders known as preference shareholders.

Legal Meaning

A public company is defined as an organisation that is not registered as private limited incorporation under section 2(71) of the Companies Act, 2013. Aside from that, the Companies Act specified the minimum paid-up share capital of a public company. A public corporation is, therefore, an entity that is not a subsidiary of a private limited company.

Public Limited Incorporation Registration Laws In India

Public limited companies, like private limited companies, are governed by the Companies Act of 2013 and the previous company law of 1956.

  • The Companies Act of 2013 defines what public incorporation is. According to section 2(71), public incorporation is an organisation that does not have the same meaning as a private company.
  • Aside from that, the public company's share capital may be changed. Public incorporation is not required to have a certain amount of share capital.
  • The public company's structure allows it to collect funds via primary and secondary problems. A prospectus is distributed to the public when a primary issue is pursued.
  • A prospectus is described in section 2(70) of the Companies Act 2013 as a document that includes a notice or invitation to the public to subscribe to the company's shares.
  • As a result, when a company publishes a prospectus to the public, it is an invitation to the public to subscribe to the company's shares.
  • A public limited company must have at least three directors and seven shareholders or members.
  • There is no provision for the company to have a minimum amount of share capital, according to the Companies (Amendment) Act, 2015.
  • When it comes to registering shares on a public stock exchange, the public incorporation must maintain compliance. For example, when listing shares on the stock exchange, compliance with the listing agreement rules must be upheld.
  • Also, the public company shall follow the provisions of the SEBI (LODR) Regulations, 2015.
  • Public limited incorporation is also a division of a public company. And if the business is a private one, this would be taken into account.

What Are The Benefits of Public Limited Incorporation?

So, let’s discuss the benefits of the Public Limited Incorporations:

Increase In Borrowing Capacity

When it comes to borrowing capital from banks and other financial institutions, public incorporations have an excellent reputation in the eyes of the law. Being public incorporation has the additional benefit of providing the company recognition.

You can Easily Transfer Shares.

Shares are legal documents that can be transferred by the Indian Contract Act of 1872. These instruments can be easily moved under the Companies Act of 2013, with minimal enforcement criteria. Besides that, listing shares on a stock exchange facilitates the transfer of shares from one party to another.

Separate Legal Entity

A public limited company's directors and shareholders profit from the concept of an independent legal entity. This means that the members' and directors' responsibility is only limited to a certain number. Creditors cannot contact the representatives of the public incorporation who owes them a debt.

You Can List Your Shares in the Stock Exchange

A stock exchange may list the shares of a public company. On the other hand, the public business must observe compliance when listing its securities on a stock exchange. The public incorporation will collect secondary finance through this mechanism. As a result, when registering a public limited company, an applicant must consider the above.

Eligibility Criteria For Public Limited Incorporation Registration

We have listed all the eligibility criteria for the registration of Public Limited Incorporation:

Minimum Amount of Directors

Any corporation is needed to have a certain number of directors. It is a statutory requirement for incorporation, whether private or public, to have a minimum number of directors. Sections 149 to 172 of the Companies Act of 2013 deal with the provision for directors’ appointment. As a result, a public limited company must have at least three directors on its board.

Aside from that, the Companies Act of 2013 requires the appointment of independent directors. Section 149(6) of the Companies Act of 2013 contains this provision. As a result, public incorporation would have both independent and executive directors on its board of directors.

Minimum Amount of Shareholders

A public limited company, like a private limited company, must have a certain number of shareholders. According to the Companies Act of 2013, the minimum number of shareholders for a public limited company is seven. If the number of shareholders required by the corporation is not met, penalties will be imposed.

DIN For All Directors

A director identification number is abbreviated as DIN. This number is assigned to a director under Sections 153 and 154 of the Companies Act of 2013. A director identification number (DIN) is an eight-digit number assigned to a director hired by the organisation.

The DIN application must be submitted in compliance with the requirements of FORM- DIR 3. However, the above requirement is simplified, and directors will obtain the DIN number by filing a SPICe form with the MCA. It has become much easier to secure the DIN using this approach.

Submission of Documents

Once all of the company's formalities have been completed, all records must be submitted by the company. These documents include the articles of incorporation, shareholder certifications, association articles, and the memorandum of association. If these documents are sent to the MCA and ROC, the process of forming a public limited company is nearly complete.

Digital Signature Certificate of the Director

This is a crucial prerequisite for creating a public limited company. A person or entrepreneur seeking to register a public limited company must complete the necessary paperwork and apply for a digital signature certificate. This is required for at least one director in public incorporation.

A digital signature certificate would enable the applicant to sign documents electronically. Aside from that, documents signed in this manner can be distributed electronically. The provision of a DSC is mandated by law.

Company To Pursue Activities In Objects Clause

The company's memorandum of association includes several clauses. The name clause and the things clause are two of the clauses included. The organisation’s operations must be covered by the objects clause, which must be filed with the companies’ registrar.

However, there are several cases where an entity's operations are incidental to the key objects. As a result, the corporation must ensure that the activities mentioned in the organisation’s objects clause are carried out.

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