Public Limited Company: The Gateway to Public Capital
A Public Limited Company is the most prestigious form of business entity in India, offering the ability to raise capital from the general public through stock exchanges. While it comes with higher compliance requirements, it provides unmatched credibility, access to capital markets, and the potential for massive growth through Initial Public Offerings (IPOs).
This comprehensive guide covers everything you need to know about registering and operating a Public Limited Company, from initial incorporation to listing on stock exchanges.
What is a Public Limited Company?
A Public Limited Company is a company that:
- • Can offer its shares to the general public
- • Has shares that are freely transferable
- • Can be listed on stock exchanges
- • Requires minimum 7 members and 3 directors
- • Must include "Limited" in its name
- • Is governed by the Companies Act, 2013 and SEBI regulations
Key Distinction from Private Limited
Unlike Private Limited companies, Public Limited companies can have unlimited shareholders, freely transfer shares, and raise capital from the public through IPOs. However, they face significantly higher compliance requirements.
Key Features of Public Limited Companies
Separate Legal Entity
The company exists independently of its shareholders. It can own property, enter contracts, and sue or be sued in its own name.
Limited Liability
Shareholders' liability is limited to the amount unpaid on their shares. Personal assets of shareholders are protected.
Perpetual Succession
The company continues to exist regardless of changes in membership. Death or insolvency of shareholders doesn't affect the company.
Free Transferability
Shares can be freely transferred between members and the public (for listed companies) without company consent.
Requirements for Registration
1. Minimum Members
Minimum 7 shareholders required to incorporate a Public Limited Company. There is no maximum limit on the number of shareholders.
2. Minimum Directors
Minimum 3 directors required. At least one director must be an Indian resident (stayed in India for at least 182 days in the previous calendar year).
3. Capital Requirements
Minimum authorized capital of ₹5,00,000 (5 lakh rupees) required. This was previously ₹5,00,000 for public companies under the Companies Act, 1956.
4. Director Identification
All directors must have Director Identification Number (DIN) and Digital Signature Certificate (DSC).
5. Name Requirements
The company name must end with "Limited". The name should be unique and not similar to existing companies or trademarks.
Registration Process
Obtain DSC for Directors
All 3+ directors must obtain Class 2 or Class 3 Digital Signature Certificates from certified agencies.
Apply for DIN
Apply for Director Identification Number (DIN) for all directors through SPICe+ form or DIR-3 form.
Name Reservation
File SPICe+ Part A to reserve the company name. You can propose 2 names in order of preference.
Prepare Documents
Draft Memorandum of Association (MOA) and Articles of Association (AOA). Prepare declarations, affidavits, and consent letters from directors.
File SPICe+ Part B
Complete incorporation through SPICe+ Part B with details of shareholders, directors, capital structure, registered office, and applicable registrations (PAN, TAN, EPFO, ESIC).
Verification and Approval
The Registrar of Companies (ROC) verifies all documents. Upon satisfaction, issues Certificate of Incorporation with CIN.
Post-Incorporation
Obtain PAN and TAN, open bank account, appoint first auditor, and commence business operations by filing Declaration of Commencement (INC-20A).
Public Limited vs Private Limited
| Feature | Public Limited | Private Limited |
|---|---|---|
| Minimum Members | 7 | 2 |
| Minimum Directors | 3 | 2 |
| Maximum Members | Unlimited | 200 |
| Public Subscription | Allowed | Not Allowed |
| Transfer of Shares | Free transferability | Restricted |
| Stock Exchange Listing | Can be listed | Cannot be listed |
| Compliance | High (SEBI, ROC) | Moderate |
Listing and IPO Process
One of the primary advantages of a Public Limited Company is the ability to raise capital from the public through an Initial Public Offering (IPO). The process involves:
- 1. Appointment of Merchant Banker: Select lead managers for the IPO
- 2. Due Diligence: Complete legal, financial, and business due diligence
- 3. Draft Prospectus: Prepare Draft Red Herring Prospectus (DRHP)
- 4. SEBI Approval: File DRHP with SEBI for approval
- 5. Roadshow: Market the IPO to institutional investors
- 6. Price Band: Finalize price band through book building
- 7. IPO Opening: Offer shares to public for subscription
- 8. Listing: Shares listed on stock exchanges (NSE/BSE)
Compliance Requirements
Statutory Compliance
- • Minimum 4 Board Meetings per year
- • AGM within 6 months of FY end
- • Statutory Audit mandatory
- • Secretarial Audit (if applicable)
- • Cost Audit (if applicable)
Filing Requirements
- • MGT-7 (Annual Return) - 60 days from AGM
- • AOC-4 (Financial Statements) - 30 days from AGM
- • ADT-1 (Auditor Appointment) - 15 days from AGM
- • DIR-3 KYC (Annual Director KYC)
SEBI Compliance for Listed Companies
Listed Public Limited Companies must comply with SEBI regulations:
- • Listing Agreement compliance
- • Quarterly, half-yearly, and annual result announcements
- • Corporate governance requirements
- • Related party transaction disclosures
- • Insider trading regulations
- • Takeover code compliance
Penalties for Non-Compliance
| Violation | Penalty |
|---|---|
| Late filing of Annual Return | ₹100 per day (no maximum) |
| Non-conduct of AGM | ₹1,00,000 - ₹5,00,000 |
| Non-appointment of Auditor | ₹25,000 per officer |
| SEBI violations | As per SEBI Act |
Is Public Limited Right for You?
Choose Public Limited If:
- ✓ Plan to raise capital from public
- ✓ Aim for stock exchange listing
- ✓ Need maximum credibility
- ✓ Large scale operations planned
Consider Private Limited If:
- ✓ Want to avoid heavy compliance
- ✓ Limited initial capital
- ✓ Close-knit ownership preferred
- ✓ Not planning IPO in near future