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Public Limited Company – Advantages, Disadvantages and Registration Process

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:

  1. Apply for Directors Identification Number (DIN) and Digital Signatures
  2. Selection of name for the proposed company.
  3. Filing of required forms on MCA Portal (mentioned below procedure)
  4. Payment of Fees.
  5. 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)

 

 

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