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Public Limited Company

Public Limited CompanyA public limited company is a voluntary association of members which is incorporated and, therefore has a separate legal existence and the liability of whose members is limited. Its main features are :-
(a). The company has a separate legal existence apart from its members who compose it.

(b). Its formation, working and its winding up, in fact, all its activities are strictly governed by laws, rules and regulations. The Indian Companies Act, 1956 contains the provisions regarding the legal formalities for setting up of a public limited company. Registrars of Companies (ROC) appointed under the Companies Act covering the various States and Union Territories are vested with the primary duty of registering companies floated in the respective states and the Union Territories.

(c). A company must have a minimum of seven members but there is no limit as regards the maximum number.

(d). The company collects its capital by the sale of its shares and those who buy the shares are called the members. The amount so collected is called the share capital.

(e). The shares of a company are freely transferable and that too without the prior consent of other shareholders or without subsequent notice to the company.

(f). The liability of a member of a company is limited to the face value of the shares he owns. Once he has paid the whole of the face value, he has no obligation to contribute anything to pay off the creditors of the company.

(g). The shareholders of a company do not have the right to participate in the day-to-day management of the business of a company. This ensures separation of ownership from management. The power of decision making in a company is vested in the Board of Directors, and all policy decisions are taken at the Board level by the majority rule. This ensures a unity of direction in management.

(h). As a company is an independent legal person, its existence is not affected by the death, retirement or insolvency of any of its shareholders.

Advantage of Public Limited Company Disadvantage of Public Limited Company
Continuity of existence Scope for promotional frauds
Larger amount of capital Undemocratic control
Unity of direction Scope for directors for personal profit
Limited liability Subjected to strict regulations

 

Also Read : The Negotiable Instruments Act, 1881

***Frequently Asked Question about Public Limited Company

Q 1. How many peoples are required to incorporate a public limited company?

Ans:  To incorporate a Public Limited Company, a minimum of seven people are required. A Limited Company must have a minimum of three Directors and seven shareholders.

Q 2. What are the requirements to be a director?

Ans: The Director needs to be over 18 years of age and must be a natural person. There are no limitations in terms of citizenship or residency. Therefore, even foreign nationals can be Directors in a Indian Public Limited Company.

Q 3. What are the documents required for a public limited company registration?

Ans: Identity proof and address proof is mandatory for all the proposed Directors of the Company. PAN Card is mandatory for Indian Nationals. In addition, the landlord of the registered office premises must provide a No Objection Certificate for having the registered office in his/her premises and must submit his/her identity proof and address proof.

Q 4. What is digital signature certificate?

A Digital Signature establishes the identity of the sender or signee electronically while filing documents through the Internet. The Ministry of Corporate Affairs (MCA) mandates that the Directors sign some of the application documents using their Digital Signature. Hence, a Digital Signature is required for all Directors of a proposed Company.

Q 5. What is Directory Identification Number (DIN)?

Ans:  Director Identification Number is a unique identification number assigned to all existing and proposed Directors of a Company. It is mandatory for all present or proposed Directors to have a Director Identification Number. Director Identification Number never expires and a person can have only one Director Identification Number.

Q 6. What is authorized capital fee?

Ans:  Authorized capital of a Company is the amount of shares a company can issue to it shareholders. Companies have to pay the Government an authorized capital fee to issue shares in a Company. Companies have to pay authorized capital fee for a minimum of Rs.5 lakhs.

Q 7. What are the statutory compliance required for a Public Limited Company?

Ans:  A limited company must hold a Board Meeting atleast once in every 3 months. In addition to the Board Meetings, an Annual General Meeting must be conducted by the Private Limited Company, atleast once every year.

Q 8. Can NRI or Foreign Nationals be a Director in a Public Limited Company?

Yes, a NRI or Foreign National can be a Director in a Limited Company after obtaining Director Identification Number. However, atleast one Director on the Board of Directors must be a Resident India.

Q 9. Can NRIs / Foreign Nationals / Foreign Companies hold shares of a Public Limited Company?

Ans:  Yes, NRIs / Foreign Nationals / Foreign Companies can hold shares of a Limited Company subject to Foreign Direct Investment (FDI) Guidelines.

Q 10. What are the FDI Guidelines for Foreigners in a Public Limited Company?

Ans:  100% Foreign Direct Investment is allowed in India in many of the industries under the Automatic Route. Under the Automatic Route, only a post-investment filing is necessary with the RBI indicating the nature of investment made. There are a few industries that require prior approval from the RBI, in such cases, approval must first be obtained from RBI prior to investment.

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