What is Public Limited Company Registration?
A public limited company is also called a limited liability company. The main characteristic of a private limited company is that it makes its shares generally public with limited liability. The shares of a public limited company can get hold of by any person either privately or by buying the stocks in a public limited company through the stock market or by acquiring privately through Initial Public Offering (IPO). Public limited companies are commonly present in the United Kingdom. Public limited company registration can either be listed or unlisted on a stock exchange. Stocks and the play of trade in the stock market actually mean owning certain assets of a public limited company. These assets called stocks of a public limited company can be sold or bought by and to anyone considering their availability in the concerned public limited company. In this article, we will be learning all about Public Limited Company Registration, its characteristics, public limited company registration process, its advantages, and disadvantages.
Characteristics of Public Limited Company Registration
1) Directors :
As in private limited companies, a minimum of 2 directors is required to get it registered. In the case of a public limited company, the minimum number of directors required is 3. There is no upper limit to the number of directors of a public limited company. A public limited company having a minimum of 3 directors and a maximum of 200 is one of its basic characteristics.
2) Liability :
All the shareholders have no responsibility for the loss or debts of the public limited company in which they have invested. The partnership companies have this characteristic of liability being on its partner investors while on the contrary in a public limited company, the shareholders’ liability is very limited. They are not in any way personally responsible for the financial condition of their public limited company.
3) Capital :
The minimum paid-up capital of a private limited company is one lakh but for a public limited company, the bar of the amount of paid-up capital has been raised to 5 lakhs. This is another important characteristic of any public limited company.
4) Name :
The name of a public limited company is as much an important characteristic as any of its other features. Under the Companies Act of 2013, all the public limited companies are essentially required to add ‘limited’ after their name.
5) Prospectus of a public limited company :
A consolidated comprehensive statement of the affairs of the company issued by the concerned public limited company. It is a rule issued by law that all the public limited companies are required to make a prospectus stating the statement of their affairs for the knowledge of the public. This is a very unique characteristic of a public limited company.
Public Limited Company Registration Process
Before the registration of public limited company, it should be kept in mind that, at least 7 shareholders are required along with the 3 directors.
1) Self-attested copies of the address proof which can include Passport, Electricity bills, Aadhar card, etc. are required to be submitted. The Digital Signature Certificate ( DSC ) of one of the proposed directors of the public limited company is also to be submitted to the Ministry of Companies. Then, you will also need to submit an application to opt for a suitable name for the public limited company. This process might take a few days.
2) It is also an important part of a public limited company registration process is the submission of the company’s object clause. An application with the objects clause of the company explaining their working after its incorporation needs to be submitted in order to move forward with the process.
3) Form DIR12, form INC7, and form INC22 are then needed to be filled with correct details along with an application including the MOA. All these official documents are then submitted to the ROC. The ROC after checking the authenticity of the documents will give a nod to take forward the process. The public limited company can now apply for its certificate of business commencement. The certificate of business commencement is an essential document that makes a public limited company legit and up and working. After obtaining this certificate, the public limited company can officially come into being.
Documents Required for Public Limited Company Registration Process
1) Proof of Identity and address of all the shareholders and directors of the company concerned. It can be the Adhar card, PAN Card, Passport, Electricity bill, or phone bill.
2) If a director or a shareholder is not from Indian, he/she has to produce their residential card or passport in front of the concerning authorities.
3) An officially registered office in the name of the public limited company is also needed to be announced and a NOC i.e a No Objection certificate is to be submitted to claim a registered working space for the company.
4) A Director Identification Number of all the proposed directors of a public limited company is also an essential document.
5) Memorandum of association and Articles of association are also important documents to be submitted while applying for a public limited company.
6) All the public limited companies are under strict rules and they are regulated regularly by the government. They need to publish their true and factual financial report in an annual fashion to their shareholders.
Advantages of Public Limited Company Registration
1) Expansion :
Public limited company registration online has more scope for growth and expansion. Due to the large distribution of shares among the public entities, there is a low level of risk involved in the financial aspects of the company involved. So, a public limited company can easily go out and invest in endeavors and open up avenues for more expansion because of less risk involved.
2) Capital :
A public limited company offers all its shares to the general public and that is why its investments can be really high. Any person or entity can invest in a public limited company any amount of money they want with respect to the number of shares they buy. So, there is no limit to the capital that a company has. So, the more investors a public company has, the more capital it gains. This is a great advantage both for the people who invest in a public limited company and the company too as it grants profit to the people and in turn, increases the capital of the public limited company.
3) Noticeable Presence :
A public limited company is listed on a stock market and this helps the company to make an appearance in the active business. Mutual fund traders and stock market holders notice the public limited company and the business that it is doing. This directly results in more vast business opportunities for all public limited companies. Getting a company noticed in the market is the best way to increase its business. More presence a public limited company has, more business is in the way for it.
Disadvantages of Public Limited Company Registration
1) Control :
Shares are the only thing that holds control to public limited company registration. If more than 50% of the total shares are sold to any other entity, there is a possible chance the remaining shareholders can get full control of the company. Any director if has a clash of ideas with some other director, this can harm the company in many ways. This clash of interests can make the shares of a public limited company sold to other parties and the whole entity of the company based on a common vision can get collapsed. This is a major disadvantage of a public limited company registration online.
2) Legal implications :
The legal practices involved in the company are very tiring and rigorous. More transparent rules and policies should be made in order to diffuse the tension among the shareholders regarding the public limited company in which they have invested their money. A fair focus on compliance with many laws and administrative obligations should be carried out in a proper fashion. There are many complications already in the way of the proper working of a company. So, they should be tackled in a proper fashion.
3) Stock Market :
Internal assets of a private limited company determine its value. But this is not the case of a public limited company because the value of the stocks of the concerned company in the stock market is responsible for its value. Companies can collapse if their stocks drop their values and this is a very serious threat and disadvantage to the public limited company. The public limited company’s vulnerability can increase if the stocks drop or fluctuate too much in the stock market. The stocks of the company are made open to the people and other public entities which is the main cause of this disadvantage for investing in a public limited company. It is disadvantageous both to the public entities which invest in any public limited company and the company involved itself.