Public Limited Company (PLC) – Definition
A Public Limited Company (PLC) can be defined as a separate legal entity that carries its business by offering its shares to be traded on the stock exchange; making them available for the general public. As per the regulations of the corporate law in India, a PLC has to mandatorily present its financial statistics and position to the public in order to maintain transparency.
Public Limited Companies differ on various aspects from private limited companies, however, they both exist for profit-making purposes and some of the distinct characteristics of a Public Limited Company are-
- The ownership of a PLC lies with two or more shareholders, owning the shares of the company.
- As per the Companies Act, 2013, a PLC in India has to keep a sum of rupees five lacs as the minimum paid-up capital.
- The company’s existence is not dependent on the death, bankruptcy, or insolvency of any of the members.
- A public company ought to have three or more than three directors for its existence.
- A PLC needs to attain at least 90% amount of the shares issued by that company within a particular time period.
- It has to use the term ‘ limited ’ at the end in order to limit the liability of the shareholders in case of some loss to their investments, so they cannot be charged on their private assets.
- Indian PLCs need to follow the regulations set by the Companies Act, 2013.
- It can be formed with the appointment of at least two directors and one qualified company secretary.
Incorporation of a Public Limited Company in India –
To be termed as a separate legal entity the PLC needs to be incorporated by a process defined in the Companies Act, 2013. There are certain eligibility criteria to be met before a PLC can apply for incorporation, such as –
- Minimum Seven People who may act as both directors or shareholders.
- One Resident Director, a person is said to be a ‘ resident ’ if he/she stays in India for a minimum of 182 days in the previous financial year; regardless of what their citizenship is.
- Unique Name of the Company, an exclusive name for the PLC needs to get the trademark, and hence, it should not resemble any other existing company’s or LLP’s name.
- No Minimum Capital needs to be maintained by the PLC for it to be incorporated.
The incorporation and registration process of a PLC is fairly lengthy and involves various documents to be provided regarding the directors’ identities and the registered office of a business. These documents are as follows-
- Identity Proof – The disclosure of the identities of various directors and shareholders includes personal id proof like voter id, driving license, Aadhaar card, or passport. PAN card for Indians and Passports for foreign nationals; along with proof of their nationality, two passport-sized pictures, and a Resolution of the board of company / LLP for authorization of directors or partners.
- Proof of Address– Address proof of all the directors and shareholders in the form of electricity bill, mobile bill, telephone bill, or bank statement (any one of these and not older than two months).
- Proof of the Registered Office – It has to be provided in the form of utility bill of the purposed office like, rent receipts along with lease documents, conveyance, etc. or photocopy of gas bills, electricity bills, phone bills ( but not more than two months old ).
- Other Documents –
- Director Identification Number(DIN) of all the directors
- Digital Signature Certificate(DSC) of the directors
- Memorandum of Association(MOA)
- Articles of association(AOA)
The process of incorporation requires the below-listed steps to be followed –
- Name Reservation: The company needs to get its name approved under the Companies Act, 2013, which is valid up to twenty days from the date of approval.
- Digital Signature Certificate (DSC) of Director: Filing of the online application forms require the signatures supported by the DSC of the directors and the shareholders. It can also be taken along with identity proof, address proof, photographs of the respective signatories.
- Obtaining Director Identification Number: The directors also need to file a DIN application and the same should be attached with the address proof id endorsed by any CS, CMA, or CA. The Registrar of Companies (ROC) also has the responsibility of issuing a unique identification number known as Directors Identification Number (DIN) to become enable the person to become the official director in India.
- Approval of other Authorities: The applicant needs the approval from the respective department or appropriate authority, regulatory body or ministry of Central or State Government depending on the type of business and the work and submits the same to ROC.
After all the required documents have been submitted by the proprietors, then the Registrar if satisfied with them and on the basis of the forms filled would issue a Certificate of Incorporation. This bears a Corporate Identity Number ( CIN ), which will a distinct identity for the company and will also be included in the certificate.
This article is authored by Ananya Dutta, Second-Year, B.A.LL.B (Hons.) student at Institute of Law, Nirma University