A public limited company is defined as a company which is not a private company and it is authorized to offer its registered securities for sale to the general public, through a stock exchange.
Characteristics of a Public Limited Company are:
- It must have at least 7 shareholders.
- It must have at least 3 Directors
- Business can be started only when the company gets Trading certificate after getting the Certificate of Incorporation.
- It should publish a prospectus or file a statement in lieu of a prospectus before it can start transacting business.
- It should hold statutory meetings and obtain government approval for the appointment of the management.
Advantages of a Public Limited Company
- The shareholders have limited liability.
- Additional funds can be raised by issuing shares or debentures.
- Greater Borrowing power.
- Experienced Board of directors can be appointed.
- There is no restriction on transfer of shares.
Disadvantages of a Public Limited Company
- There is a loss of overall ownership.
- There is a loss of control of the business.
- All the shareholders are involved in decision making taking a lot of time.
- Cost of formation is quite high.
- Increased compliances.
- Profits are shared among a large number of people.
- Public disclosure of the financial affairs is mandatory.
Incorporation Process:
The incorporation process of a Public Limited Company is similar to that of a Private limited company having more than 7 subscribers.
We have to follow the following basic procedure for incorporation:
- Apply for Directors Identification Number (DIN) and Digital Signatures
- Selection of name for the proposed company.
- Filing of required forms on MCA Portal (mentioned below procedure)
- Payment of Fees.
- Obtain Certificate of Incorporation.
Forms that are required to be submitted on the MCA portal are:
Form |
Required For |
Requirements for filing |
DIR-3 | Application of DIN | Proof of identity and residence of applicant |
E-Form INC 1 | Getting the name availability (6 names can be proposed) | No |
E-Form INC 7 | Filing of Incorporation documents |
1.Memorandum of Association 2. Articles of Association 3. Form INC 8 – Declaration of Professional CA/CS/CMA; 4. Form INC-9 – Affidavit from Subscriber and First Directors; 5. Form No. INC-10 -Specimen Signature and Photographs of every Subscriber; 6. proof of residential address which should not be older than two months; 7. proof of identity; 8. PAN card and 9. Undertaking of non-acceptance of deposits |
E-Form DIR 12 | Particulars of appointment of directors and the key managerial personnel and the changes among them |
DIR -2 – Consent to act as a director Attachments of DIR-2 Proof of identity and residence |
E-Form INC 22 | Notice and Verification of situation of Registered Office |
1. Proof of registered office address (Conveyance/ Lease deed/ Rent Agreement etc. along with the rent receipts; 2. Copies of the utility bills (proof of evidence of any utility service like telephone, gas ,electricity etc. depicting the address of the premises not older than two months; 3. Proof that the company is permitted to use the address as the registered office of the Company (i.e. NOC from the owner) |