Introduction
A company is an association that is incorporated under the Companies Act, 2013 with the intention of earning a profit and acting as a separate legal entity. There are different types of companies that can be registered in India. But in today’s world, most businesses choose to establish a Public Limited Company because it has some unique characteristics like no minimum paid-up capital, transfer of shares, perpetual succession etc. A Public Limited Company is a separate legal entity with members having limited liability. In this blog, we will look at the definition of a public limited company and its characteristics.
Definition of Public Limited Company
A Public Limited Company is a company that has a separate legal entity. The shares of the company are sold to the public through Initial Public offer (IPO) or the secondary Indian market. In this type of company, the liability of the members is only limited to shares they own.
The Public Limited Company is defined under section 2 (71) of the Companies Act, 2013, which says that:
- A company that is not a private company.
- A company must have a minimum paid-up capital as prescribed.
- The company must be a public company for the purposes of the act if it is a subsidiary of a company that is not a private company.
Characteristics of PLC
The Public Limited Company is a separate legal entity from its members and shareholders.
- Even if one of its members dies, or becomes insolvent, or declares bankruptcy, the company continues to exist in the eyes of the law. This results in the company’s perpetual succession. The company exists until it dissolves or winds up.
- The liability of shareholders or directors is limited to the number of shares they own, which means if the company incur losses the shareholders are only accountable to pay shares they own and not the loss of the company.
- There should be at least two directors and seven members in a Public Limited Company. But there is no maximum limit specified.
- Any Public Limited Company is bound to use “LTD” at the end of the name of their company.
- Prospectus is a statement that includes detailed information and the number of shares offered by the company in an IPO. A Private Limited Company, unlike a Public Company, is not required to submit a prospectus to the Registrar before allocating shares.
- The benefit of a public company is that it may borrow from a variety of sources. A public business can raise funds by issuing debentures (secured or unsecured) and has the authority to issue public shares (equity or preference).
- The minimum amount that must be received on the subscription of shares is 90% of the shares in the public company. If the company does not get the required 90%, it will be forced to close its doors.
- A Public Limited Company in India is required to obtain both a Certificate of Incorporation and a Certificate of Commencement. After having both, the PLC can start their business.
- In Public Limited Companies, there is no minimum paid-up capital required to incorporate the company.
Conclusion
We will conclude by saying that a Public Limited Company in India offers a distinct set of characteristics that maybe quite beneficial to some companies. Before deciding on your business structure, it is critical to examine your company’s demands and also examine the legal aspects and characteristics.