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1. What is a Public Limited Company?

Public companies have inherent advantages over private companies, including the ability to sell future equity stakes and increased access to the debt markets. A Public Limited Company is Incorporated and Governed by the Indian Companies Act 2013. Public Limited Company is a Purely Separate Legal entity distinct from its members and directors. It has the advantage of limited liability, greater stability and recognition. The Basic Requirement for a Public Limited Company in India is to have Minimum Three Directors and Seven Shareholders.

  • Public Companies can issue shares to the public through the stock exchanges or stock market.
  • These can also raise additional capital by issuing debentures and bonds from the public on the basis of their financial performance.
  • These are commonly known as publicly traded companies or publicly held companies.
  • Shares of these companies are freely transferable that provides more liquidity to its shareholders.

2. What are the benefits or advantages of a public limited company?

  • LIMITED LIABILITY: It is an important benefit of incorporation, once shareholders have paid for their shares; the members of the company have no further liability to contribute towards debt incurred by the company.
  • SEPARATE LEGAL ENTITY: A company is a legal entity and a juristic person established under the Act. Therefore a company has legal capacity to own property and incur debts. The members (Shareholders/Directors) of a company have no liability to the creditors of a company for such debts.
  • ACCESS TO FINANCE: A Public Company can easily obtain finance from banks and other financial institutions as these types of institutions are more willing to extend finance to this type of company than to smaller forms of business entities.
  • BRAND AWARENESS : Since these types of companies are often listed on stock exchanges, people will be easily and quickly recognize the brand or name of the company.
  • MORE CAPITAL: Since a public company can sell its shares to the public thus the potential capital that can be raised is larger. A sole proprietorship or ordinary business partnership cannot usually raise the same amount of capital without additional leverage.
  • CAPACITY TO SUE AND BE SUED: The Company being legal person has full right like a natural person to institute legal proceedings against or to bring a suit in a court of law and also can be sued in its own name.
  • FREELY TRANSFERABLE: Shares of these types of companies are freely transferable that provides more liquidity to its shareholders.
  • CONTINUITY OF MANAGEMENT: The management of a company might be separate from its ownership. Management of the business can then continue in spite of any changes in shareholders. Employees can be promoted to senior management positions without necessarily holding any shares in the company. They can also be given shares as an incentive.
  • OWNING PROPERTY: A company being a legal person, can acquire, own, enjoy and alienate property in its own name. No shareholder/director can make any claim upon the property of the company so long as the company is a going concern.
  • ABILITY TO TAP FINANCIAL MARKETS: The biggest advantage to these types of companies is their ability to tap the financial markets by selling stock (equity) or bonds (debt) to raise capital (cash) for expansion of business activities.

3. What is the procedure to incorporate a public company?

There are two ways of company Incorporation in India.

  • Through Normal Mode (INC-1)
  • Through Fast Approval Mode (INC-29)

Through Normal Mode (INC-1)

  • To collect papers (Photos, Id & Address Proofs) from clients.
  • To apply for their Digital Signatures (DSC).
  • To apply For their Director identification number (DIN).
  • To Reserve the desired name for company Incorporation.
  • To draft all the incorporation documents.
  • To get all the documents signed, stamped and notarised.
  • To File Incorporation Forms with the Registrar.
  • Get COI (Certificate of Incorporation)
  • Apply for Pan Card of the company.
  • To handover all the papers to clients for further processing.

Through Fast Approval Mode (INC-29)

  • To Collect Papers (Photos, Id & Address Proofs, Address proof of Premises) From Clients.
  • To draft all the incorporation documents.
  • To get all the documents signed, stamped and notarised.
  • To apply for their Digital Signatures (DSC).
  • To apply For their Director identification number (DIN).
  • To File Integrated form for incorporation with the Registrar.
  • Get COI (Certificate of Incorporation)
  • Apply for Pan Card of the company.
  • To handover all the papers to clients for further processing.

4. What is the Time Frame for Company Incorporation?

Through Normal Mode. It usually takes 10-15 days after receipt of all the necessary Documents, The breakup of the Number of days is as follows:

Activity Days
Taking Digital Signature of Directors 1 Day
Taking Directors Identification Number (DIN) 1 Day
Reservation of the name of the Company 5 Days
Preparation of other Document such as MOA, AOA, Forms etc 2 Days
Filling of Documents with Authorities 1 Days
Getting Final Certificate of Incorporation 5 Days
Total Number of Days 15 Days

 

Through Fast Approval- It Usually Takes 4-5 days after receipt of all the necessary Documents.

Activity Days
Preparation of all Document such as MOA, AOA 1 Day
Taking Digital Signature of Directors 1 Day
Taking Directors Identification Number (DIN) 1 Days
Filling of Documents with Authorities 1 Days
Getting Final Certificate of Incorporation 1 Days
Total Number of Days 5 Days

5. What are the Charges for Incorporating a Company?

Fees for the incorporation decide on company capital, state and total number of directors.

 

6. What is the minimum paid up capital requirement for Incorporating a Public Company?

A public company must have a minimum paid up capital of Rs.5,00,000 (Five lakh).

7. How many Persons are required to incorporate a company?

  • The Minimum numbers of 7 persons (members) are required to incorporate a company (It may be noted that there is no restriction of maximum number of members in case of public company)
  • Legally minimum 3 directors are required and 7 shareholders are required.
  • These two persons can act in both capacity as directors and as shareholders.

8. Whether shares can be transferred or not in case of public company?

In case of public company there is no restriction on the transferability of the shares. Shares can be easily and quickly transferred from one person to another.

9. How a public company can go for subscription of its shares?

A public company is free to invite public for subscription of its shares by issuing a prospectus (which means any document or notice, circular, advertisement or other document inviting offers from the public for subscription or purchase of any securities of a body corporate).

10. Can a public company further issue its shares directly to general public?

No, firstly a public company has to offer the further issue of shares to its existing shareholders as right shares. Further issue of shares can only be offer to general public with the approval of existing shareholders in the meeting of shareholders only.

11. What is the validity of Certificate of Incorporation Issued by the ROC?

Once a Certificate of Incorporation is issued by the ROC, it is valid for the lifetime of the company unless it goes for winding up.