Public Limited Company (PLC)

 

Definition

​

A public limited company is the legal status of any firm which has offered shares to members of the general public and in turn owns a limited amount of its own shares. A PLCs stock or company share is presented to the general public and can be purchased or claimed by any individual, either privately during the process of the initial public offering or via trades on the stock exchange market. Public limited firms are also known as publicly held companies.

 

Public limited companies (PLCs)are commonly used in the United Kingdoms and in a number of Commonwealth nations. This tag is used in contrast to the Inc. or Ltd. tags that are being used in the United States and a number of other nations. In the regions named above, the PLC tag is mandatory and it is used to inform investors or any individual who wishes to deal with such a company that the firm is publicly held and in most cases; it is very large.

 

Public limited companies can either be listed or unlisted on stock exchanges. It is up to them if they wish to be listed and if they wish not to be. They are also regulated just like other types of firms and are mandated to publish their financial reports and explain their financial health to help investors and shareholders size up the value of the stocks. Unlike other company statuses, the lifespan of a shareholder in a publicly held company (whether the main shareholder or not) doesn't affect how long such a business would continue to hold. These types of businesses are best used to raise capital, but they also bring about increased regulations.

​

Advantages of Public Limited Company:

​

Limited Liability

Shareholder liability for the losses of the company is limited to their share contribution only. This is what makes it a separate legal entity from its shareholders.

The business can be sued on its own and not involve its shareholders. The company does not belong to any person since one person can own only a part of it.

​

Number of Members

A public limited company has a minimum number of seven shareholders or members and a limitless number of members. It can have as many shareholders as its share capital can accommodate.

 

Transferable shares

Shares of a public limited company are bought and sold in a stock exchange market. They are freely transferable between its members and people trading in the stock exchange.

 

Life Span

A public limited company is not affected by the death of one of its shareholders, but her shares are transferred to the next of kin and the company continues to run its business as usual.

In the case of a director’s death, an election is held to replace the deceased director.

 

Large Capital

Public limited companies enjoy an increased ability to raise capital since they can issue shares to the public through the stock market.

​

They can also raise additional capital by Issuing debentures and bonds through the same market from the public. Debentures and bonds are unsecured debts Issued to a company on the strength of its integrity and financial performance.

​

Disadvantages of Public Limited Company:

​

High Costs

A Public Limited Company is normally a complex thing to start. The firm banker (or “underwriter”) then offers the initial shares to the public (and keeps a substantial commission).

Often, the costs of setting up a public firm and Initial Public Offering (IPO) can run into hundreds of thousands of dollars.

​

Public Books

The term “public” here is to be taken literally. Once a firm goes public, the firm is open to public inspection. The financial books and records of the firm are open to anyone, allowing the competition to see precisely how much profit or loss the firm is experiencing.

​

Greedy Shareholders

Those who buy shares have no particular interest in the firm except in that it makes a quick buck.

Most companies, however, have an interest in laying out a long-term growth plan that takes patience and planning It is not often many shareholders see it this way.

​

Slow Decisions

If the company is public, it must have a board of directors representing the main and most powerful stockholders.

​

This means, in turn, that major decisions must go through the board, with debates and voting. In reality, this entails those decisions will be slow and often painful. Sometimes, they might not be made at all.

Incorporation of a Public Limited Company (PLC) in India

​

A public limited company has a distinct identity and is owned by the public and managed by the board of directors.

​

Therefore, the registration procedure of a PLC is quite lengthy and involves a lot more formalities. Let us now go through the various requirements for this form of business organization:

​

Eligibility

​

The basic requirements or eligibility criteria for setting up a public limited company are as follows:

• One Resident Director: Out of the three or more directors of a public limited company, one has to be a resident of India compulsorily.

• Minimum Seven People: To establish a PLC, minimum of seven people are required who can become directors, shareholders or both.

• Unique Name: Every PLC needs to have an exclusive name to get the trademark registered. This name should not be identical to any other company.

• No Minimum Capital: A PLC can be started with the amount of capital required, and there is no minimum capital specified. However, the minimum share capital (both authorized and subscribed) needed is rupees five lacs.

​

Documents Required for Public Limited Company Registration

​

An applicant has to collect all these documents to file along with the incorporation application:

• Identity Proof such as Aadhar card, PAN card, Driving License, Voter Id of all the designated directors and shareholders. 

• Address Proof of all the proposed directors and shareholder of the company.

• PAN card details of all the directors and shareholders

• Utility bill such as telephone, gas, water or electricity bill of the registered office as a residential proof of the business place. It should not be older than 2 months. 

• An NOC or No Objection Certificate from the landlord of the business place. 

• DSC or Digital Signature Certificate of the designated directors

• Memorandum of Association (MOA) and Article of Association (AOA)

 

Public Limited Company Registration Procedure

​

There are a few important registration procedures for obtaining Public Limited Company Registration, which is as follows:-

​

1. Digital Signature Certificate (DSC) of the Director

The application for such companies is filed through the online portal, and the company shareholders and directors should sign it. So, DSC, aka Digital Signature Certificate, should be addressed by shareholders and directors. They are accountable for signing registration e-form before the filling of incorporation application. The issuance of DSC seeks some mandatory documents such as address proof, identity proof along with some photographs.

​

2. Obtain Director Identification Number (DIN)

DIN is a unique identification number issued by Registration of the Companies ROC. DIN renders a permit to a director to work in the company. Without it, no director can work in an Indian company regardless of their working background or experience.

​

3. Approval of other authorities

The Registrar of Companies might direct the applicant to render the approval of any department, appropriate authority, regulatory body, or Ministry of the Central or State Government(s) w.r.t task that needs to complete.

​

4. Document submission

SPICE+ application for registration/incorporation is made to Registrar of Companies (ROC) attached with affidavits, Memorandum of & Article of Associations, and declaration.

​

5. Certificate of Incorporation

ROC will then conduct an extensive examination of SPICE+ incorporation form along with the attached documents. If the findings of the scrutiny come out to be in favour of the applicant, then ROC will issue a Certificate of Incorporation without any hassles. As soon as the public limited company obtains the Certificate of incorporation, they can start their operations.

​

6. PAN  & TAN of the Company

PAN and TAN are applied together attached to the company registration form and are issued along with a Certificate of Incorporation.

​

7. Opening of Bank Account

Once the applicant submits the mandatory documents and the Certificate of Incorporation, the banks open a current account for the company.

​

ANNUAL COMPLIANCES

A Company which is a subsidiary of a public company shall be deemed to be a public company for the purpose of this Act even where such subsidiary continues to be a private company in its articles.

Classification:

​

Listed Company:

A Listed Company is a company as defined in Section 2(52) of the Companies Act, 2013

It is a company the shares of which are listed on the recognized stock exchange.

People can buy or sell the shares of Listed Company through the platform of on the recognized stock exchange.

​

It is recognize as listed Company due to the reason that it get its capital after getting listed on recognized stock exchange through IPO.

​

Unlisted Company:

An unlisted Company has nowhere defined in Companies Act, 2013.

It can be a Public Limited Company or can be Private Limited Company.

As the name suggest no shares of the unlisted companies are available to the general public for investment purposes.

​

Annual Compliances for Public Company

​

1. Holding Board Meeting

This is the first compliance that needs to be done by Public Limited Company. Meeting among the board members, the first meeting of the Board shall be conducted within 30 days by Public Limited Company. Thereafter, atleast 4 Board meetings to be conducted every year with a gap of 120 days between each meeting of the Board. This means that every by Public Limited Company shall have a minimum of 4 board meetings every year and gap must not be more than 120 days between subsequent Board meeting or every quarter one meeting. Records of these Board meeting shall also be created which is known as minute of the meeting. For this, registers are to be maintained by the Company. It can also be prepared digitally. Here the agenda of the meeting, attendance of members and the discussion are recorded.

​

2. Appointment of the Auditor

The auditor for the Company shall be appointed by the Board of Directors within a period of 30 (Thirty) days from the Date of incorporation of the Company. The appointment shall be filed in ADT-1. In case of failure of the Board to appoint the first auditor within the said period of 30 days, the Board shall inform the members of the Company who shall appoint an auditor within a period of 90 days. The appointment can only be done in an extraordinary general meeting.

​

3. Disclosure of Interest by Directors

It is to be noted that every director shall in its first board meeting discloses about the interest in any company, firm or other AOI (including any shareholding interest). The disclosure of interest shall be filed every year, if there is any change in the interest, it is to be filed along with the list of relatives as well. This disclosure of interest shall be filed in MBP 1 form shall be submitted with the Company.

 

4. Declaration of Commencement of Business

Declaration of Commencement of Business shall be filed in Form 20A. It is a mandatory compliance and needs to be filed with due time lines as prescribed below. The Form 20A shall be certify by the professional like CA, CS or CMA.

 

5. Due date for the first time filing of Form 20A

Particulars

Due date

If the Company is incorporated on/or after 2nd November 2018

The form must be filed within 180 days From the date of incorporation

Note: Failure to comply with annual compliance may lead to the removal of the company’s name from the Register of Companies.

 

6. Holding Annual General Meeting

The Public Limited Company shall hold a general meeting every year. It is mandatory to conduct it on or before 30th September every year. In case of first AGM shall be held within 9 months of closing of Financial Year. It is to be noted that the AGM shall be conducted within office hour i.e., 9 AM to 6PM. The day must not be a public holiday and a clear notice of 21 days shall be given to the members. The Approval of accounts, appointment/re-appointment of auditors, Remuneration of directors are some of the agendas of AGM.

 

7. Filing of Annual Return

ROC Filing is nothing but submission of annual accounts and financials prepared by the Company. Here, list of shareholders, directors, interest, details of other things, board reports and other stuff required to be furnished by the Company with ROC.

​

Following are the forms which required to be submitted.

Form MGT-7 (Annual Return)

Public Limited Company shall file its Annual Return within a period of 60 days from the date of holding of Annual General Meeting (AGM).

Form AOC-4 (Financial Statements)

Public Limited Company shall file its Balance Sheet together with statement of Profit and Loss Account and Director Report within a period of 30 days from the date of holding of Annual General Meeting (AGM).

 

8. Certification of Annual Return in case of listed company:

It is mandatory to get the certification if the listed company having paid up share capital of 10 crores or more and turnover of 50 crores or more, From Company Secretary in Practice. The certificate shall be in FORM MGT-8.

 

9. Requirement of Secretarial Audit Report

• Every Listed Company

• Public company if having paid up share capital of equal to or more than 50 Crores.

• Every public company having a turnover of 250 Crores or more has to obtain secretarial audit report in form MR-3 from Practicing Company Secretary.

 

10. KYC of Directors of the Company

All directors are required to file a form to do the KYC with the RoC, if you have already submitted the form then one needs to verify the OTP over email and mobile no. otherwise all new director needs to submit this form.

 

11. Due Date for filing DIR-3 KYC:

On or before 30th April of immediate next Financial Year

 

Other Compliances for Unlisted Company

Return of Deposits

Rule 16 of Companies (Acceptance or Deposit) Rules, 2014 provides for the Return of Deposit should be filed before the Registrar of Companies in FORM DPT-3 on 30th June of every year.

 

 

DISCLAIMER-These materials are public information and have been prepared solely for educational purposes. These materials reflect only the personal views of the author and are not individual legal advice.

It is understood that each case is fact specific and that the appropriate solution in any case will vary. Finally, the owner will not be accountable for any loses injuries or damages from the exposures or usage of this information.

​