Overview of Public Limited Company (PLC)
Public limited companies have all the rights enjoyed by an entity that is a corporation with limited liability and is an ideal option for medium and small-sized enterprises that want to get equity capital from the general public.
Similar to other companies as well, like other companies, a Public Limited Company is also registered according to the regulations and rules in the Companies Act, 2013. Public Companies enjoy the advantage of having limited liability for their members.
It also has the option of selling its shares to raise the capital of the business. It is incorporated with a minimum of directors, and it has stricter rules and regulations in comparison to a Private Ltd.
In this article, we will be going to discuss more briefly about Public Limited Companies and their various characteristics. So, without any further ado, let’s begin with it.
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.
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.
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.
The word “LTD”, which will be added to the end of any public company’s name, will be included in the name.
The minimum number of Board Of Directors is 3, maximum of 12. They are elected by shareholders at the Annual General Meeting.
Only the Director ID Number (DIN), issued by the Ministry of Corporate Affairs, must they possess.
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.
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.
It’s easy to purchase shares in a public company, and it’s just as easy to leave the public company.
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.
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.
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 not traded or registered on the share market.
Many public limited companies were founded as private limited businesses, which then became public after they grew. To be eligible for publication, a public limited company must have a share capital of at least Rs. 5,00,000.
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.
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.
- 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
A public company is an attractive option for businesses with large amounts of capital to invest. They are good for entrepreneurs who intend to run large-scale activities. An investor in a public limited company is not individually liable for any losses or debts of the firm that exceed their investment. Entrepreneurs in a PLC can increase 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.
Our professionals at ODINT Consulting have an in-depth understanding of Public Limited Companies and are available to assist you at every stage.
Limited liability companies have distinct legal existence, limited liabilities, flexible taxation, and straightforward operations.
Increasing shareholder value by making as much money as possible has traditionally been the core objective of practically every publicly traded corporation.
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.
- A public limited corporation is one whose shares are sold openly and is registered on a reputable share market. Private limited corporations are neither registered on a share market nor traded openly.
- Contrary to private limited corporations, which must consist of not less than two members, public limited businesses must consist of not less than seven members.
- A private limited corporation must have at least one lakh in paid-up capital, while a public limited firm must have five lakhs.