There are various business structures such as Sole Proprietorship, One Person Company, General Partnership, Limited Liability Partnership, Private Limited Company, and Public Limited Company, that an entrepreneur can choose to start a business. Choosing an ideal legal structure would be one of the first decisions an entrepreneur would make. But how to decide which business entity is ideal for your business? 

In this article, we will discuss Public Limited Company.

A Public Limited Company is a business entity wherein the ownership is dispensed to the general public shareholders through the free trade of shares on stock exchanges. 

Profit-Sharing

Public Limited Companies are owned by large groups of people, each of whom owns anywhere from one share to thousands of shares in the company. The profits of the company are divided among the shareholders and paid to them as dividends as decided by the board of directors of the company.

Transferability of Shares

The shares of a Public Limited Company are free to buy and sell to anyone. Shares can be bought or sold through the stock market. Additionally, shares can be sold to a specific individual or an entity outside the market, irrespective of whether the company is listed or not. 

Liability

In a Public Limited Company, all the shareholders have limited liability. In case of loss to the company, the liability of the shareholders is limited to the amounts; they have invested in the company.

Legal Formalities

The company is governed by the provisions of the Companies Act, 2013. Depending upon the nature of the business, a company may attract other provisions of laws to comply. 

Suitability of Public Limited Company

A Public Limited Company form of business entity is not suitable for all types of business activities. Small scale businesses that cater to the needs of limited sections of the society, need not be incorporated as Public Limited companies. It is best suited for large-scale businesses only.

Documents Required for Public Limited Company

1. Proof of identity of all the shareholders and directors.
2. Proof of address of all the directors and the shareholders.
3. PAN number of all the shareholders and directors.
4. Utility bill of the proposed office i.e. proposed registered office for the company.
5. A NOC (No Objection Certificate) from the landlord where the office of the company will be situated.
6. Director Identification Number (DIN) of all the directors.
7. Digital Signature Certificate (DSC) of the directors.
8. Memorandum of Association (MOA).
9. Articles of Association (AOA)

Checklist for Obtaining Public Limited Company Registration

The following requirements have to be fulfilled to obtain Public Company Registration: 

• Minimum 7 shareholders are required to form a public limited company.
• A minimum of 3 directors is required to form a public limited company.
• A digital signature certificate (DSC) of one of the directors is needed while submitting self-attested copies of identity and address proof.
• Directors of the proposed company require a DIN.
• An application is required to be made for the selection of the name of the company.
• An application comprising the main object clause of the company is to be made. This object clause will define what a company will pursue after its incorporation.
• Submission of the application to ROC along with the required documents like MOA, AOA, duly filled Form DIR – 12, Form INC – 7, and Form INC – 22 is needed.
• Payment of the prescribed registration fees to the ROC is required.
  After obtaining approval from the ROC, the company should apply for the ‘certificate of business commencement.

Whether an entrepreneur chooses a partnership, LLP, Private Limited Company, or some other entity, taking time to choose the right business entity is crucial. Once chosen, changing entities can be difficult. And with the right help in choosing a business entity, your business may outlast you.

Choosing the ideal legal entity for your business should be done in consultation with a legal professional. Your Virtual Legal Counsel can guide you to set up the most preferred legal entity for your business. Your Virtual Legal Counsel will work with you as a partner in incorporating and protecting your business. Schedule a meeting with YVLC to discuss the ideal structure for your business to set up in India. 

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