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PUBLIC LIMITED COMPANY (PLC)

WHAT IS A PUBLIC LIMITED COMPANY

A Public Limited Company under Company Act 2013 is a company that has limited liability and offers shares to the general public. It's stock can be acquired by anyone, either privately through (IPO) initial public offering or via trades on the stock market. A Public Limited Company is strictly regulated and is required to publish its true financial health to its shareholders.

CHARACTERISTICS OF PRIVATE LIMITED COMPANY

  • Members - To start a company, a minimum number of 2 members are required and a maximum number of 200 members as per the provisions of the Companies Act, 2013.
  • LimitedLiability - The liability of each member or shareholders is limited. It means that if a company faces loss under any circumstances then its shareholders are liable to sell their own assets for payment. The personal, individual assets of the shareholders are not at risk.
  • Perpetual succession - The company keeps on existing in the eyes of law even in the case of death, insolvency, the bankruptcy of any of its members. This leads to the perpetual succession of the company. The life of the company keeps on existing forever.
  • Index of members - A private company has a privilege over the public company as they don't have to keep an index of its members whereas the public company is required to maintain an index of its members.
  • Number of directors - When it comes to directors a private company needs to have only two directors. With the existence of 2 directors, a private company can come into operations.
  • Paid-up capital - It must have a minimum paid-up capital as may be prescribed from time to time.
  • Prospectus - Prospectus is a detailed statement of the company affairs that is issued by a company for its public. However, in the case of a private limited company, there is no such need to issue a prospectus because this public is not invited to subscribe for the shares of the company.
  • Name-It is mandatory for all the private companies to use the word private limited after its name.

SECTIONS/REGULATIONS/RULES APPLICABLE TO PRIVATE LIMITED COMPANY

  • Section 2(68) of the Companies Act, 2013;
  • Companies Incorporation Rules, 2014;

PUBLIC COMPANY UNDER COMPANIES ACT, 2013

is not a private company; A "Public Company" means a company which: -

  • Section 2(71) of the Companies Act, 2013;
  • has a minimum paid-up share capital, as may be prescribed; Provided that a company which is a subsidiary of a company, not being a private company, shall be deemed to be public company for the purposes of this Act even where such subsidiary company continues to be a private company in its articles ;
    • persons who are in the employment of the company; and
    • persons who, having been formerly in the employment of the company, were members of the company while in that employment and have continued to be members after the employment ceased, shall not be included in the number of members; and
  • prohibits any invitation to the public to subscribe for any securities of the company;

ADVANTAGES OF A PUBLIC COMPANY

  • High Credibility: The investors find the public limited company to be more reliable and trustworthy, increasing its credibility.
  • Tax Efficient: A PLC gets various tax benefits like tax-deductible costs and other allowances. On paying off the corporation tax, the company is saved from paying high-income tax.
  • Limited Liability: The shareholders are not liable to pay the company’s debts or losses beyond their investment value in case of insolvency or bankruptcy.
  • Additional Capital: Initial Public Offering (IPO) is a source of raising funds for the public limited company to meet the capital requirement of the business.
  • Expert Board of Directors: The company is efficiently managed by the board of directors comprising of expert and talented people.
  • Business Growth and Expansion: The acquisition of additional by issuing of shares, provide financial strength to the business and develops the scope of growth.
  • Easy Share Trading: The shares of a public limited company can be bought or sold in seconds on the stock exchange market. Thus, making it convenient for the investors and shareholders to acquire a part of the company.
  • Risk Spreading: Since, there are many shareholders owning small portions in the company, the risk of loss and insolvency is also widespread among them.
 
     
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