Incorporation of Public Limited Company

All the large scale businesses that deal with a huge amount of capital must incorporate as a Public limited company. In order to register as a Public Limited company, an entity must have at least seven members. However, there is no frontier on highest number of stakeholders for incorporating as a Public Limited Company.

The Public Limited Company usually comes in the list of the stock exchanges to raise funds from the general public. This is why all the public limited companies have to comply with many compliances of the government.

Overview of Public limited company

Under section 2(71) of the companies Act, 2013, a Public Limited Company is a company that is

1) Not a private company

2) A company having minimum paid-up capital of INR 5 lakhs

A subsidiary company can also incorporate it as a Public Limited Company. But it should not be a subsidiary to a private limited company.

As per the Companies Act, a Public Limited company is an entity that gets listed in the stock markets. It can gather funds from the general people. Thus, a public limited company must comply with a lot of regulations. To incorporate as a public limited company, a company must meet the following criteria:

1) The company that wants to register as a public limited company must not be a private company.

2) Minimum paid-up share capital of the company must be INR 5 lakhs.

3) It should have a minimum of three directors.

4) The total number of directors that it can have is fifty.

5) It should have at least seven shareholders.

6) There are no limits on the maximum number of shareholders.

Incorporating as a Public limited company has its own benefits. When a company register as a public limited company, it obtains the following advantages:

Unique legal entity

As per the Companies Act, a public limited company is a separate lea entity from its stakeholders. The company has its own PAN, bank accounts, contracts, Licenses, approval assets, and liabilities. Thus, incorporating as a public limited company offers you a unique entity different from the shareholders.

Multiple routes of funding

Another advantage of incorporating as a Public Limited Company is that you can raise capital from the general public and financial institutions. Public limited companies get listed in the stock market. This allows the public to invest in the company. A public limited company can raise capital through equity shareholding, preference shareholdings, and the debentures. Thus, registering as a Public limited company opens up multiple routes for raising capital.

Quick share transfer

It is one of the biggest perks of registering as a public limited company. If you register as a public limited company, you can easily transfer your shares to other legal entities. The shareholders can transfer the shares to any individual or organization in India or abroad. You can also change the directorship of a public limited company to ensure more finance.

Limited responsibility

In a public limited company, the shareholders are provided with limited liabilities. If the company faces any unexpected liability, it will only affect the company, not the shareholders?

Attention of the peoples

Incorporation, as a public limited company, helps a company to get listed in the stock market. This ensures mutual funds, hedge funds, and other traders notice the activity of the entity. Thus, it results in better business opportunities.

Yearly docility of a Public Limited company

The yearly agreements for a listed and an unlisted Public limited company are separate. Annual compliances of an Unlisted Public limited company are;

Board meetings

As per section 173 of Companies Act, 2013, any Unlisted Public limited company must hold at least four board meetings.

Appointing an auditor

As per section 148(3), along with the rule 6(2) and the rule 6(3A) of the companies Act, a public limited company must appoint an auditor to record the cost. To appoint an auditor, they need to file form CRA-2. The appointment of the auditor has to be done within 30 days from the board meeting. Or else a public limited company can also appoint within 180 days of a financial year.

Return of deposits

All the unlisted Public limited company has to file the return of deposits with ROC. This has to be done in compliance with rule 16 of Companies Act.

Appointment of CFO

As per section 203 and the rules eight and 8A of the companies Act, a public limited company must appoint a CFO within 30 days of AGM.

Annual general meeting

As per Section 96 of Companies Act, 2014, all the unlisted Public limited company must hold an Annual general meeting.

CSR committee

Following section 135 of Companies Act, 2104, the CSR committee of an unlisted PLC must hold at least four meetings within 120 days of gap.

Director's disclosure

The directors of a public limited company must disclose any company's financial interest by filing the form MBP-1 following section 184.

Annual general meeting

As per section 121(1) of the companies Act, all the public limited companies must conduct an Annual general meeting and file form MGT-15 after the meeting.

Financial statement

Every listed public limited company must file its financial statements according to section 137 of the companies Act.

Annual return

All the listed Public limited companies must file their annual return in accordance with section 92 of Companies Act. The annual return must be filed using form MGT-7.

ITR

This has to file with the income tax department by using ITR form -6.

Secretarial Audit report

Under section 204 of the companies Act, 2013, all the listed public limited companies must submit a secretarial audit report.