Setindiabiz Team |

Updated : September 07, 2024

What is a Public Limited Company ?

Overview : A Public Limited Company (PLC) is a business structure that can sell shares to the general public and also can freely trade its shares on public platforms. Simply put, any individual/entity has access to purchase the shares of a public limited company through the stock exchange market. Dive into the fundamentals of a Public Limited Company; its Definition, Characteristics, and Prerequisites for enrollment of PLC, with this blog!

According to the Companies Act of 2013, a public limited company is one that sells shares to the general public, and can freely trade shares on public platforms. In other words, anyone can purchase the shares of a public limited company on the stock exchange market. A public limited company is subject to stringent regulations and is obligated to disclose its actual financial situation to its shareholders or to the general public.

A public limited company, or PLC, is a type of corporate structure that exists as a separate legal entity from its owners, in contrast to other business structures like sole proprietorships and partnership firms, protecting its shareholders from paying off personal liabilities.

Definition of a Public Limited Company

A Public Limited Company is one of the many preferred forms of business structures in India. A public limited company is a company incorporated under the Companies Act, 2013. That offers limited liability to its owners and shareholders. Its shares can be traded on public platforms like stock exchange, and are open for sale to the general public as well.

A Public Limited Company is regulated by the Ministry of Corporate Affairs and the Securities and Exchange Board of India (SEBI). It is subject to stringent laws by these regulatory agencies, and is required to regularly update its shareholders of its genuine financial situation.

As a legally incorporated entity, a public limited company has a distinct legal identity, and is entitled to the right to hold properties and assets in its name.

Characteristics of a Public Limited Company

The characteristics of a Public Limited Company differs slightly from other kinds of companies, like private limited companies and one person companies. We have mentioned all the characteristics of a Public Limited Company below.

Directors According to the Companies Act of 2013, a minimum of 3 directors and a maximum of 15 are permitted for a public limited company. Directors of a company are responsible for controlling the management of the company, and acting on behalf of the company. All his actions must ensure the best interests of the company.
Limited Liability Each shareholder of a public limited company has liability limited towards the business. Unlike partnership firms and sole proprietorships, where the partners and proprietors are jointly and individually liable towards the business, a shareholder of a public limited company is not personally liable for any loss or debts of the company for any amount greater than the amount they have subscribed to.
Minimum Paid-up capital A public limited company must have at least Rs 5 lakhs as paid-up capital, or any larger amount specified by the Companies Act, 2013.
Prospectus Public limited companies are required by the Companies Act to mandatorily publish a prospectus, which is an extensive summary of the company’s affairs that is informed to the general public. Contrarily, it is optional for private limited companies to publish such a prospectus of the company. This is so because private limited corporations can’t offer their shares for subscription to the general public.
Name According to the Corporations Act of 2013, all public limited companies must end their names with the word “limited Company”.

Necessities for enrollment of Public Limited Company

For the creation of a public limited company, many rules and guidelines are supported by the Companies Act of 2013. The following is something to keep in mind when enrolling in a public limited company:

For a public limited company to get established, at least seven shareholders are required.
For a public limited company to be formed, at least three directors are required.
It is necessary to have a basic offer capital of Rs. 5 lakhs.
When submitting the application for incorporation of a public limited company, self-attested copies of Identity and address proof and a Digital Signature Certificate of the director who has been authorized to sign the application on the behalf of the company.
The Director Identification Number of all directors of the company will also be required to be furnished in the application of company incorporation.
The name of a Public Limited Company has to be unique, original, and legally valid.
It is necessary that a public limited company must have a registered office address where its main office or its principal place of business is located.
The public limited company must be established with a lawful purpose or objective. The primary business activity with which the company operates is considered as its primary purpose or objective.
Among the two most important documents that a company must draft are the Articles of Association and the Memorandum of Association.

Is going public for investment risky for a Public limited Company?

Businesses are not obligated to eventually go public. Many companies operate exclusively in the private sector. The majority of companies which decide to become public limited companies have a strong management team and are thus in a good position to mitigate any risks associated with going public.

Conclusion

A public limited organization is often created to generate funds from external sources, such as the general populace, for business startups, commercial development, technological advancement, global advancement, and so forth. In contrast to a small local store, a PLC is more reasonable only for large business organizations with a global customer base and greater growth opportunities.