Public limited companies are incorporated or registered in India under the Indian Companies Act 2013.
As per the present law, Public limited company are defined as a type of organization which is not a private ltd company i.e. It’s not managed privately by group of individuals.
Shares are freely traded by the public and the organization registered as a public limited company uses letters “ltd” or “limited” after its name. These organizations are also known as publicly held companies.
A public limited company can be listed on the stock exchange. If a private ltd company want to get listed in stock exchange then it has to get converted to public ltd first before starting the listing process.
When promoter wants to incorporate a company as public limited, it must follow the procedures as prescribed by the Ministry of Corporate Affairs of India.
Minimum Requirements to form a Public Limited Company
- Minimum capital requirement for a public limited company is Rs. 5, 00,000
- Minimum number of members or shareholders required is 7 (seven)
- Must have minimum number of at least 3 directors – 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
Advantage of Public Limited Company
- Shares of a public limited company are freely transferable and no need to take any one’s consent for such transfer.
- The liability is limited to the face value of the shares the shareholder’s own.
- Shareholders do not have the right to participate in the day to day management of the business.
- Can have large amount of capital
Disadvantage of public Limited Company
- More legal formalities to follow
- Strict control and regulations to comply.
- May face management problems such as slow decision making and industrial relations problems.
A private ltd can be converted to a public limited company and after such conversion it can get listed on a stock exchange of India. In India Reliance Industries Ltd, Infosys Ltd etc are example of public limited company.