Public Limited Company

What is the Purpose of Public Limited Companies?

calendar12 Jan, 2023
timeReading Time: 6 Minutes
What is the Purpose of Public Limited Companies?

A company is defined under Section 2(20) of the Company Act of 2013, as “A company formed in accordance with this Act or any previous act.” Under the Act, there are several forms of the company, but one should select their business model based on the particular nature, appropriate laws and regulations, etc. As per Section 2(71) of Companies Act, 2013, “A public company means a company which is not a private company” Public company may be incorporated for any lawful purpose by seven or more persons. Public limited companies are essentially corporate entities that are registered under the Indian Companies Act. They have their own legal identity and are regarded independent from their owners. A PLC’s stock or business share may be purchased or claimed by anybody, either privately during the initial public offering procedure or through exchanges on the stock exchange market. While these businesses are still owned and managed by their owners, they operate under their own set of rules, duties, laws, and legal rights.

The shareholders or ‘stakeholders’ of public limited companies are the firm’s owners. The entity’s ownership stake is divided into various pieces known as ‘shares’ or ‘equity shares. Examples of the Public Limited companies in India.

Some of the examples of Public Limited companies (PLCs) in India are as follows:

  • Bharat Heavy Electricals Ltd., popularly known as BHEL
  • Bharat Petroleum Corporation Ltd also known as BPCL
  • Coal India Ltd.
  • Hindustan Petroleum Corporation Limited, popularly known as HP
  • Indian Oil Corporation Ltd.
  • National Thermal Power Corporation Ltd., popularly known as NTPC
  • Oil and Natural gas Corporation Ltd., popularly known as ONGC
  • Punjab National Bank, popularly known as PNB
  • State Bank of India, popularly known as SBI
  • Steel Authority of India Ltd., popularly known as SAIL

Features of Public Limited Companies

A company that has been incorporated as Public Limited Companies has the following features:

  • The Limited Liability

In the event that the company suffers losses, the shareholders are not personally accountable. For instance, if a share has a face value of 100 rupees and a member has already paid 70 rupees per share, he may only be required to pay up to 30 rupees per share for the lifetime of the company. In the event of the company’s dissolution, a member’s liability is only limited to the amount they may agree to contribute to the assets of the company.

  • Directors

A Public Limited company in India must have a minimum of 3 directors in accordance with Section 149 of the Companies Act, 2013, which applies to public companies. Additionally, a business may have up to 15 directors. But a firm may nominate more than the allowed number of people with a special resolution.

  • Paid up capital

All the public limited companies in India must have a minimum paid-up capital of INR Five 5 Lakhs or any such a higher amount as prescribed under the Companies Act of 2013. Further, there are no such rules/laws regarding the maximum capital amount.

Name

According to the provisions of the Companies Act of 2013, all the business models who wish to incorporate as Public Limited Companies in India must add Ltd after their name. For example: ABX Ltd.

  • Prospectus

As per Section 2(70) of the Companies Act 2013[1], a prospectus means any documents including red-herring and shelf prospectus or any notices, circular, advertisement, or other documents that are issued by the company for inviting offer from the public for the subscription of shares or debentures.

  • Easy Transferability:

It claims that there are no restrictions on a shareholder’s ability to transfer their shares to the general public. This is a legal right. A clause in the articles cannot restrict this right. These articles, however, also have the authority to impose legitimate and reasonable restrictions on members’ rights to transfer their shares in a way that prescribes the method in which shares will be transferred. The shareholder may submit an application to the Central Government to increase the effectiveness of this entitlement in the event that the firm refuses to register the transfer.

  • Raise more capital:

The ultimate purpose of any company is to increase their wealth. In a similar manner, public limited companies offer their shares to the general public, increasing the company’s capital.

Eligibility criteria of a Public Limited Company

Here are all the legal requirements of a Public Limited Company in India.

  • First and foremost is all the business looking to register themselves as a Public Limited Company must appoint the following persons before going for the process of registration;
  • The company must appoint a minimum of 2 directors and maximum 15 directors;
  • From all the directors at least 1 should be the resident of Indian; 
  • A company is required to have at least two shareholders;
  • A company must have the minimum share capital of INR 5 Lakhs.

What are the documents required for the incorporation of Public Limited Company?

Following documents are required for registering a Public Limited Company in India:

  • Address and Identity proof of the shareholders and directors of the company
  • A copy of PAN card of all the members which includes shareholders and director of the company
  • A copy of utility bills of the registered office of the business
  • A no objection certificate (NOC) (in case the premises is rented) which needs to be duly signed by the owner of the premises where company has its registered office.
  • Details of DIN and DSC of all the directors of the company
  • Certified copy of MOA (Memorandum of Association)
  • Certified copy of AOA (Articles of association)

Points to keep in mind after incorporation

  • The Section 7(4) of the Companies act, says that the members of the company to maintain and preserve all the documents and the information filed for the incorporation at the office.
  • Section 173 of the Companies Act says that the 1st board meeting should be held within a time period of 30 days from the date of registering the company. Also the same has to be notified to all the members by giving notice not less than 7 days before such meeting.
  • The rule 5 of the Companies (Share Capital and Debentures) Rules says that a Public Limited Company can issue shares to its subscribers and deliver the share certificates (as per Section 56(4)(a) of the Companies Act) to the subscribers within a period of two months from the date of incorporation of the company.
  • All the Public Limited Companies are required to open a bank account in the Company’s name and check whether subscription money has been received or not.
  • A Public Limited Company is required to pay the stamp duty on all the shares issued by them in accordance with the Indian Stamp Act of
  • According to Section 118 of the Companies Act, all Public Limited Companies are required to keep a record of minutes within a period of 30 days from the conclusion of such meeting.
  • As per Section 139(6) of the Companies Act, all Public Limited Companies are required to appoint the 1st auditor of the company in the board meeting within a period of 30 days from the date of incorporation.

Compliance for Public Limited Companies

Name of E-Form/Return Purpose of E-Form/Return Related Section Due Date
DIR-8 Intimation by Director about disqualification Section 164(2) of the Companies Act of 2013 read with Rule 14(1) of the Companies (Appointment & Qualification of Directors) Rule of 2014 Once in a Financial Year
MBP-1 Disclosure of Interest by Directors Section 184 of the Companies Act of 2013 read with Rule 9 of the Companies (Meetings of Board & its Powers) Rule of 2014 Once in a every financial year; or upon every change in the interest of Directors
E-form DIR-3 KYC   Annual Director’s KYC Section 153 of the Companies Act, 2013 read with Rule 12A of the Companies (Appointment & Qualification of Directors) Rules of 2014 Half yearly
E-form PAS-6 Reconciliation of Securities Capital Audit Report Section 42 of The Companies Act of 2013 read with Rule 9A of Companies (Prospectus & Allotment of Securities) Rules of 2014 Half yearly
E-form MSME-1   Half yearly MSME Return Companies (providing Information about payment to micro & small enterprise suppliers) Orders of 2019   Half yearly MSME Return  
FLA FLA Return   Annual return of deposits or the outstanding loans other than deposits Annually
ADT-1 Auditor appointment A company uses Form ADT-1 to intimate the ROC about the auditor’s appointment in the board meeting. Upon fresh appointment
Form No. MGT-15 Form for filing the report on Annual General Meeting (AGM) Section 121(1) of the Companies Act of 2013 and Rule 31(2) of Companies (Management & Administration) Rules of 2014 Annually
E-form AOC-4 (CFS) (XBRL) Annual Filing for audited financial statements of the company along with the report of the director and auditor of the company Section 129, Section 134 and Section 137 of The Companies Act of 2013, read with the Companies (Accounts) Rules of 2014 Annually
E-form MGT-7   Filing of Annual Return Section 92 of The Companies Act of 2013, read with Rule 11 of The Companies (Management & Administration) Rules of 2014 Annually
E-form CRA-4 (XBRL) Filing of Cost Audited Reports of the company Section 148 of The Companies Act, 2013 read with Rule 6(6) of the Companies (Cost Records & Audit) Rules of 2014 Annually (If applicable)
E-form BEN-1 File declaration by the Significant Beneficial Owner (SBO) Section 90 of the Companies Act, 2013 read with the Companies (SBOs) Rules, 2018 Within 30 days of acquiring the vital Beneficial ownership
E-form BEN-2   Return filed to the Registrar in respect of declaration by the significant beneficial owner Section 90 of The Companies Act of 2013, read with the Companies (SBO) Rules of 2018 Within 30 days from the receipt date of the declaration in form BEN-1

Conclusion

In all the commonwealth countries, PLC (Public Limited Company) is a prevalent type of business structure. A tag of Ltd. is carried with the companies to inform all the potential investors that they can purchase a share of the company. The buyers of these shares have a limited liability, which means that they will not be held liable or responsible for any loss of the business. These types of companies are the best to raise capital for the organisation

You instantly become a shareholder of a public limited business that is listed on a stock market when you invest in it. Being a shareholder provides you a claim on the company’s earnings, which may be given to all shareholders on a regular basis in the form of dividends. Furthermore, when the firm is eventually liquidated, you will be entitled to a residual claim on the net assets after the corporation has deducted all of its existing liabilities.

Read Our Article: Public Limited Company Registration Process In India

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