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Priyanka Bajpayee
| Updated: 05 Feb, 2020 | Category: Public Limited Company

Advantage and Disadvantage of Public Company Registration

Public Company registration

Public Company registration is playing a vital role in the economy of India, which results in the generation of employment and Income and in maintaining the substantial Capital and Industrial Base.

In the topic, we will discuss “What is Public Company, how to register Public Company and what the criteria are for Public Company Registration and what are the advantage and disadvantages of Public Company.”

What is a Public Company?

Public Company Registration is done under the Companies Act, 2013. The registration of Public Company is subject to strict compliances. Further, if the company has a vision of huge capital investment, it can go for Public Company Registration.

Key features of Public Company registration

The Public Company registration requires the following key points mentioned below-

  • Minimum 3 directors and 7 shareholders.
  • Company shall end with the word ‘limited’.
  • No limitations on the maximum number of shareholders.
  • Acceptance of deposit from the Public.
  • Shares are freely transferable.

Registration Process of Public Company Registration

Public Company registration is a complex procedure as it requires proper documentation. The working of the Public Company is subject to more strict compliances of the provision of the Companies Act 2013.

  • Recognizing 7 shareholders and 3 directors

For Public Limited Company Registration, a minimum of 7 shareholders and 3 directors are required. Shareholders can be individuals, companies or LLPs, but only individuals can become directors of the company. It is not necessary that the director shall be the shareholder of the company and shareholders need not necessarily be the directors of the company.

Note – Indian company laws specify that only an individual can be appointed as a director of a company.

  • Apply for Digital Signature Certificate and Director Identification number.

For company registration, (Also in case of Public Company Registration) an applicant can apply for DIN through SPICE+ Form only. The requisite details of proposed Directors not having DIN must be filled into SPICE+ Forms.

However, in the case of the company is already in existence, DIR-3 can be filled for the appointment of the director not having DIN. For the same, an applicant who intends to be appointed as director of the company already in existence shall make an application electronically in form DIR-3 to the Central Government[1] for allotment of DIN along with such fees as provided under the Companies (Registration Offices and Fees) Rules, 2014.

  • Apply for name availability either through RUN web form or through SPICE+ form Directly 

What is the RUN Web Form?

RUN (RESERVE UNIQUE NAME) is a web form for reserving the name of the proposed company and for changing the name of an existing company. RUN WEB FORM helps a company in reserving the name quickly and easily even before obtaining a Digital signature.

For Company registration, the applicant can either apply through RUN service for reserving a name or use the SPICE+ form process for name reservation and incorporation of a company directly.

Through the web service available at MCA, Reservation of name shall be made by using RUN Webform or through SPICE which may either be approved or rejected by the Central Registration Centre

Through SPICE+ form

FORM is a single application for reservation of name, for the incorporation of the company and application for allotment of DIN. SPICE+ form helps in fast track incorporation of a company in India. 

Arrangement of requisite documents required for register a public company, I.e. Details of the Subscriber and Directors (ID and Address Proof), Registered Office address documents.

  1. Arrangement of requisite Authorised Share Capital
  2. Incorporation and issuance of Certificate of Incorporation

Once the applicant company does the process, The ROC will issue the Certificate of Incorporation.

Advantages of Public Company Registration

  • Limited Liability of the shareholders

In Public Company registration, the liability of the shareholder and Directors is limited to the extent of the shares they hold in the company. For example, if the company suffers from any financial contingencies because of primary business activity, then in such case personal assets of shareholders and Directors will not be snatched by the Banks, creditors, and government.

  • Raising the capital through Public Issue

In the case of Public Company Registration, the proposed company can raise funds through the Public.

  • Separate Legal Entity

Shareholders and Directors may come and go, but the existence of the company continues to exist. i.e. the absence or movement of any shareholder in the company will not affect the existence of the company.

  • Unlimited source of raising fund

The company has an unlimited source of raising fund through Public which results in pursuance of new projects and for capturing the new market

  • Easy Transferability

The shares of a public limited company are easily transferable. Shares of the company are listed on a stock exchange; the shareholders find it is easy to transfer the share in the company. In the case of Public Company Registration, shareholders are less bound to remain with the company, which results in making people more willing to invest.

  • Maintains the Transparency

Because of Public involvement, the company publishes its statutory details and reports to maintain greater transparency and also to provide accurate information of its current financial position.

  • Maintains the Brand Position

Being registered as a Public Company, it improves the brand position of the Company. Listing the shares of the company in the stock exchange enhances the brand position and reputation of the company.

Disadvantages of Public Company Registration

  • Lack of Flexibility

Flexibility always acts as strength to every organization, but in the case of the public company, there is no such advantage. Every public company is bind by the rules and regulations, which results in a lack of flexibility in its operations.

  • Lack of secrecy

To maintain the transparency and trust of the shareholders, the company provides full disclosure to the public due to which secrecy cannot be maintained. The Public is involved in decision making, the company cannot maintain the secrecy.

  • Suitability

A public limited company is only favourable to large scale a business which is a disadvantage to small scale industries.

  • High Costs

Registering the company as a Public Company requires a huge cost. To start a public company huge investment, time and procedural things are required to be complied with. The profit of the company depends upon the investment you have done.

Takeaway

Every aspect has its pros and cons. The advantage of the PLC is visible to all; some disadvantages of the public company cannot be ignored. Public company registration offers shares to the public at large, which provides better business opportunities. The registration of public company offers additional opportunities which generate revenue through selling the new shares in the public.

Read our article:Public Limited Company Registration Process in India

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Priyanka Bajpayee

Priyanka Bajpayee has done Masters in International Business Law and well versed in content writing covering the area of legal and finance. Also, she has practical experience of almost 1.5 years in Legal compliance and secretarial work.

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