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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 PUBLIC LIMITED COMPANY

  1. Members - The minimum number of members in the public company required is 7 and for maximum there is no limit.
  2. LimitedLiability - The liability of the shareholders/directors is limited to the extent of the shares owned by them. The shareholders are not liable personally in case of losses or debts suffered by the company.
  3. 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.
  4. Index of members - APublic company is required to maintain an index of its members.
  5. Number of directors - In case of public company, the number of directors can be minimum 3 and maximum can be as many. There is no above limit. They must only possess the Director Identification Number (DIN) which is issued by the Ministry of Corporate Affairs (MCA).
  6. Paid-up capital - It must have a minimum paid-up capital as may be prescribed from time to time.
  7. Prospectus - A public limited company can issue a prospectus for inviting the public to subscribe to its shares.Prospectus is the statement comprising the detail information about the company and the number of shares invited by the company in that particular IPO or subsequent listing.
  8. Name-In the name of the public company, the word “LTD” will be prefixed at the end of the name.

SECTIONS/REGULATIONS/RULES APPLICABLE TO PUBLIC LIMITED COMPANY

  1. Section 2(71) of the Companies Act, 2013;
  2. Companies Incorporation Rules, 2014;

PUBLIC COMPANY UNDER COMPANIES ACT, 2013

Section 2(71) of the Companies Act, 2013 states that a "Public Company" means a company which: -

  1. is not a private company;
  2. 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 ;

ADVANTAGES OF A PUBLIC COMPANY

  1. High Credibility: The investors find the public limited company to be more reliable and trustworthy, increasing its credibility.
  2. 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.
  3. 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.
  4. 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.
  5. Expert Board of Directors: The company is efficiently managed by the board of directors comprising of expert and talented people.
  6. Business Growth and Expansion: The acquisition of additional by issuing of shares, provide financial strength to the business and develops the scope of growth.
  7. 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.
  8. 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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