Overview of Public Limited Company Registration

A public limited company is an entity that has its shares listed in a public stock exchange. An individual going for public limited company registration must differentiate the meaning of public limited company from a private limited company. Shares are offered in the stock exchange to raise money. An offering of shares in a stock exchange for the first time by a company is known as a primary offering. Public companies can go for secondary offerings based on the requirements. However, these offerings can only be given to a particular class of shareholders known as preference shareholders.

Under section 2(71) of the Companies Act, 2013, a public company is understood as an entity which is not classified as a private limited company. Apart from this, the minimum paid-up share capital of a public company is prescribed as per the requirement of the companies act. A public company can also be understood as an entity which is not a subsidiary of a private limited company.

Usually, these forms of business structures are considered by companies that have a large form of infrastructural plans. Some examples of public companies would include Biotechnology Companies and Information Technology Companies. These companies usually raise capital through primary and secondary issues, apart from securing regular profits.

Law related to Public Limited Company Registration in India

Like private limited companies, public limited companies are regulated by the Companies Act, 2013 and previous company law 1956.

The meaning of a public company is present under the Companies Act, 2013. As per section 2(71), a public company is an entity which does not have the meaning of a private company. Apart from this, the share capital of the public company can be changed. A public company does not need to have a specific amount of share capital.

The structure of the public company allows it to raise some form of finance through primary and secondary issues. When going for a primary issue, a prospectus is offered to the public. Under section 2(70) of the Companies Act 2013, a prospectus can be understood as a document which includes a notice or an invitation to the public to subscribe to the shares of the company.

Hence when the company issues a prospectus to the public, it is an invitation to the public to subscribe to the shares of the company.

Minimum three directors and seven shareholders or members are required for a public limited company.

As per the Companies (Amendment) Act, 2015, there is no requirement for the company to have a minimum amount of share capital.

When it comes to registration of shares in a public stock exchange, then compliance has to be maintained by the public company. For instance, when listing shares in the stock exchange compliances has to be maintained as per the rules of the listing agreement.

The public company must also comply with the requirements of the SEBI (LODR) Regulations, 2015.

A subsidiary of a public company is also treated as a public limited company. This would be considered even if the company is a private company.

Why is Public Limited Company Registration Beneficial?

Public Limited Company Registration is beneficial for the following reasons:

• Shares can be transferred easily

Shares are legal documents which can be transferred as per the Indian Contract Act, 1872. Under the Companies Act, 2013, these instruments can be transferred easily with minimum compliance requirements. Apart from this, a listing of shares in a stock exchange, make it easier for transfer of shares from one party to another.

• Increased Borrowing Capacity

In the eyes of the law, public companies are reputed when it comes to borrowing money from banks and other financial institutions. An added advantage of being a public company would give the company recognition.

• Separate Legal Entity

The principle of separate legal entity is enjoyed by the directors and shareholders (members) of a public limited company. This means that the liability of the members and directors is only limited to a specific amount. Creditors cannot approach the members in case of any debts owed by the public company.

• Shares can be listed in the Stock Exchange

Shares of a public company can be listed in a stock exchange. However, compliance has to be followed by the public company in listing its shares in a stock exchange. Through this process, the public company can raise secondary finance. Hence an applicant must consider the above when going for public limited company registration.

Eligibility Criteria for Public Limited Company Registration

The following criteria are required by the entity to be eligible to be registered as a public company:

• Minimum Amount of Shareholders

Like a private limited company, a public limited company must have a minimum amount of shareholders. As per the requirements of the Companies Act, 2013 the minimum amount of shareholders for a public limited company is seven. There could be penalties imposed if compliance is not met with the requirement of the number of shareholders of the company 

• Minimum Amount of Directors

Every Company is required to have a minimum number of directors. Be it a private company or a public company, it is a statutory requirement for the company to have a minimum amount of directors.  Under Section 149 to 172 deals with the requirement for the appointment of directors under the Companies Act, 2013. Hence a public limited company must have a minimum of three directors on the board. Apart from this, there is a requirement for appointment of independent directors under the Companies Act, 2013. This requirement is present under section 149(6) of the Companies Act, 2013. Hence a public company has to have directors who are classified as independent directors and executive directors.

• Digital Signature Certificate of the Director

This is one of the important requirement for forming a public limited company. An individual or entrepreneur going for public limited company registration must carry out the formalities and apply for the digital signature certificate. This requirement is needed for at least one director in the public company.

A digital signature certificate will allow the applicant to sign documents in electronic form. Apart from this, documents are signed through this method can be delivered electronically. The requirement of a DSC is mandatory as per the law.

• DIN for all Directors

DIN is an abbreviation for a director identification number. Under section 153 and 154 of the Companies Act, 2013, this number is allocated to a director. A director identification number (DIN) is an eight-digit number allocated to the director when the company recruits them. The application for the DIN has to be filed in accordance with the provisions of FORM- DIR 3. However, the above requirement is simplified, and directors would receive the DIN number through filing SPICe form with the MCA. Through this method, it is become straightforward to secure the DIN.

• Company to Pursue Activities in Objects Clause

The memorandum of association of the company contains different clauses. Some of the clauses included are the name clause and objects clause. The activities of the organisation must be under the objects clause filed with the registrar of companies. However, there are specific instances where the activities carried out by an entity can be incidental to the main objects. Hence, the company must ensure to carry out activities which are present in the objects clause of the organisation.

• Submission of Documents

Once all the formalities of the company are fulfilled, all the documents must be submitted by the company. These documents include the incorporation documents, shareholders certifications, Articles of Association and Memorandum of Association. Once these documents are submitted to the MCA and ROC, the public limited company registration process is almost complete.

Process for Public Limited Company Registration

The process for public limited company registration is similar to private company registration. The following steps are required to be followed for public limited company registration:

• Filing the Form

The application form for public limited company registration must be completed online. This must be done through the respective MCA portal. Along with this, all documents have to be submitted.

• Applying for DSC and DIN

In the next step, the applicant must apply for a Digital Signature Certificate and Director Identification Number. The digital signature certificate would provide authenticity for processing electronic documents. Apart from this, the DSC also helps in carrying out electronic signatures as per the requirements of the act. Applying for a DIN will allow the company to recruit a minimum amount of directors to carry out the requirements of a public limited company.

• Verifying the Name of the Company

In this step, the name of the company is checked and verified as per the requirements of the Ministry of Corporate Affairs (MCA). The name of the company must not be similar to any other name. Apart from this, the name of the company must not breach any provisions related to intellectual property law in India.

• Filing SPICe Form

When the name of the public limited company is approved by relevant authorities, then the applicant would go in for filing SPICe form for securing the certificate of Incorporation. When the SPICe form is filed by the applicant, the DIN number would also be allocated to the directors of the company.

• Submitting Documents

Once the above steps are carried out, the applicant must submit all the documents to the MCA. The documents which have to be filed with the authorities will include the memorandum of association and articles of association. Along with this, the company has to submit collateral documentation such as the mission, goals, objectives and long term aspirations of the company.

• Incorporating the Company

After verifying the process, the MCA and Registrar of Companies will issue the certificate of incorporation of the public limited company. This certificate as a legal document to prove the status of the public limited company.

• Opening a Bank Account

In the final step, a bank account has to be opened in the name of the public limited company. This must be open to carry out day to day transactions on behalf of the organisation. This bank account must be differentiated from opening an individual bank account.

Is it beneficial to go for public limited company registration or private limited company registration?

When critically analysing the differences between both the entities, the following can be understood:

From the above differentiation, it is clear that both private limited company and public limited companies have their benefits and disadvantages. Hence, depending on the requirement of the entrepreneur establishing such forms of business entities should be analysed in depth.

Documents required for incorporation of a public limited company

• Identity Proof- Such as PAN Card, Aadhaar Card, Driving License and Voter ID
• Utility Bills- Electricity, Water and Rent
• Registered Office Address- Any utility bill can be utilised for this purpose
• Address of the Shareholders
• Digital Signature Certificate
• Directors Identification Number
• MOA and AOA

TAP GLOBAL Advantage- Public Limited Company Registration

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• Our team of professionals comprising of Chartered Accountants, Company Secretaries, Lawyers, and Financial Executives.
• We have experience in registering different forms of entities.
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