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Public Limited Company (PLC): Working, Characteristics & Advantages

A public limited company is a firm that is regulated by executives and acquired by stakeholders. A PLC can provide some amount of shares to the general public.

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public limited company plc

What is a Public Limited Company (PLC)?

A public limited company is a firm that is regulated by executives and acquired by stakeholders. A PLC can provide some amount of shares to the general public. As PLC is even registered on the share market & it expects to be much more clear & public about its facts, features, & plan than a private company.

However, a PLCs stock or firm share is introduced to the general public & could be bought or acknowledged by any person, either personally during the cycle of the IPO or through trading in the stock market. PLC is even recognized as a publicly held firm.

How does a Public Limited Company Work?

Public limited companies (PLCs) business are very normally utilized in India, United Kingdoms & in an amount of Commonwealth countries. Eventually, this label is utilized with indifference to the Inc. or Ltd. These are such labels that are being utilized in the US & different parts of countries.

In the countries quoted above, the PLC label is necessary & it is utilized to notify investors or any person who aspires to buy and sell with such a firm that the company is publicly available & most few the time it’s very huge.

However, PLC in India can either be registered or unregistered on the share market. It’s completely onto them, whether they want to be registered on not.

Besides their listing decision on the stock market, they are ordered to showcase their financial year reports & illustrate their economic condition to enrich investors’ & stakeholders’ beliefs & even to gain public trust.

The lifespan of a shareholder in a publicly-held company doesn’t impact how long it will continue to be a firm. These businesses can be used to raise capital but also have increased regulation.

Characteristics of a Public Limited Company (PLC)

Separate legal entity

A Public Company is a lawful business entity that has a separate identity from its members/shareholders.

Easy Transferability

A shareholder of a public limited company can easily transfer its shares to the board of the shareholders/directors is limited to the extent of the shares owned by them. In the event of any losses or debts, the shareholders are not personally liable.

Paid-up Capital

For a public company to begin its operations, the minimum paid up capital required is Rs 5,00,000. This is the amendment to the Companies Act 2013.

Name

The word “LTD”, which will be added to the end of any public company’s name, will be included in the name.

Directors

Public companies can have a minimum of 3 directors and a maximum of as many as you like. There is no upper limit.

Only the Director ID Number (DIN), issued by the Ministry of Corporate Affairs, must they possess.

Prospectus

A prospectus can be issued to invite the public to subscribe to its shares by registering a public limited company.

A prospectus is a statement that contains detailed information about the company as well as the number of shares requested by the company for an IPO or subsequent listing.

Borrowing capacity

Public companies have the advantage of being able to borrow money from many sources. Public companies can issue debts (secured and unsecured) to raise money. It can also issue preference or equity shares to the public. The company can receive financial aid and loans from banks and other financial institutions.

Number of members

There must be 7 members in a Public company, there is no upper or lower limit to this number.

Board of Directors

The minimum number of Board Of Directors is 3, maximum of 12. They are elected by shareholders at the Annual General Meeting.

Voluntary Association

It’s easy to purchase shares in a public company, and it’s just as easy to leave the public company.

Minimum Subscription

The minimum amount that must be received for subscriptions of shares is 90 percent of shares in the public company. The company cannot continue to operate if they are unable to pay the 90 percent amount.

Minimum subscribers

The 7 members of the Public company are the subscribers of the Memorandum of Association of Public Company.

Certificate of Commencement

This is a vital document that must be obtained by the public company before starting a business. The Certificate Of Incorporation is the last document needed for a private company. 

For public companies, both the Certificate of Incorporation and Certificate of Commencement is required.

Memorandum of Association

The MOA, which is an important document for the formation of a public company, is essential. After completing the Articles of Association, a private company can begin its business. For a public company, the Memorandum must be submitted to MCA along with the company’s registration.

Section 2(56), Companies Act 2013, defines Memorandum. It outlines the main goals of the company, that is, the main business the company will be involved in.

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Is a limited company public or private?

Public limited companies are open to the public. This means anyone can purchase shares in them. Private limited companies (Ltd), however, are still available and are one of the most common business structures in the UK. 

Many public limited companies were founded as private limited businesses, which then became public after they grew. To be eligible for publication, a private limited company must have a share capital of at least PS50,000.

Most companies will need to achieve this threshold by completing a period of business growth. To go public, the company will need 75% shareholder votes. Companies House will need the proper paperwork.

Advantages & Disadvantages of a public limited company

Public limited companies are a better choice for businesses than the cons. Although there are many benefits to going public, the changes required to the management structure will have significant consequences.

Public limited company advantages

  • Share sales can be used to raise capital for the company.
  • This capital can be used to fund expansion or new opportunities
  • You can also use capital to pay off your debt
  • Increased brand awareness through publicity
  • The stock market listing can improve a company’s prestige and reputation
  • Public records may make it easier for you to find business partners
  • A brand’s transparency can help customers perceive it better

Disadvantages of a public limited company

  • A PLC requires two directors, while an Ltd needs only one.
  • Companies House and taxes are more closely regulated
  • Public companies have a shorter deadline for tax payments to respective authorities of the country. 
  • A company secretary for a PLC must have a high level of qualifications, unlike the company secretaries of Ltd.
  • Anybody can become a shareholder, and this can cause a company’s vision to be diluted.
  • More power is distributed to the less vulnerable shareholders, the more vulnerable they are.
  • Public limited companies must hold an annual general assembly

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Conclusion

A public company, given the market’s current state and expanding economy, is an attractive option. For businesses with large amounts of capital to invest, it is considered a good idea. It increases the capital of the company by inviting the public to subscribe to shares.

The capital is invested in a variety of securities, which helps to reduce overall risk. It eventually gives the company growth opportunities, we are ODINT Consultancy, here to help you out in each & every step of yours.

FAQ’s

It gives creditability to the company in the sights of financial organizations, distributors, and likely customers.

Yes, a sole proprietorship can be modified into PLC after ensuing the companies act, 2013 protocols.

Yes, any outside residents or an NRI can be a director or stakeholders of a PLC.

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