Limitations of a Public Limited Company

Limitations of a Public Limited Company:

  1. Higher Regulatory Compliance:
    • Public limited companies must adhere to stricter regulatory norms, including regular filings with SEBI, the Registrar of Companies (RoC), and stock exchanges.
  2. Greater Public Disclosure:
    • The company must make its financials and other critical information public, reducing privacy and potentially exposing sensitive data to competitors.
  3. Cost of Formation:
    • The cost of registering and maintaining a public limited company is higher than that of a private limited company, given the need for audits, regulatory compliance, and public disclosures.
  4. Risk of Hostile Takeovers:
    • Since shares of a public limited company can be freely traded, there is a risk of hostile takeovers if a significant portion of shares is acquired by external entities.

Steps to Register a Public Limited Company in India:

  1. Obtain Digital Signature Certificate (DSC):
    • The first step is to obtain Digital Signature Certificates (DSC) for all proposed directors and shareholders. This is necessary for filing the registration forms online.
  2. Director Identification Number (DIN):
    • All proposed directors must have a Director Identification Number (DIN), which can be obtained through the MCA’s website.
  3. Name Approval:
    • Apply for the company name using the RUN (Reserve Unique Name) service on the Ministry of Corporate Affairs (MCA) portal. The name must be unique and must include the suffix “Limited” at the end.
  4. Prepare Incorporation Documents:
    • The next step is to draft the Memorandum of Association (MOA) and Articles of Association (AOA) of the company, outlining its objectives, rules, and regulations.
  5. Filing with the Registrar of Companies (RoC):
    • File the incorporation forms, including Form SPICe+ (INC-32), along with the necessary documents such as the MOA, AOA, and details of directors and shareholders, with the Registrar of Companies.
  6. Issue of Certificate of Incorporation:
    • Once the RoC is satisfied with the documents, it will issue a Certificate of Incorporation, officially registering the public limited company.
  7. Apply for PAN, TAN, and Bank Account:
    • After incorporation, the company must apply for a Permanent Account Number (PAN) and Tax Deduction and Collection Account Number (TAN). A bank account must also be opened in the company’s name.
  8. Comply with Post-Incorporation Requirements:
    • After registration, the company must comply with several post-incorporation formalities, such as holding the first board meeting, appointing auditors, and allotting shares.

Documents Required for Public Limited Company Registration:

  1. For Directors and Shareholders:
    • PAN Card (for Indian nationals) or Passport (for foreign nationals)
    • Proof of Identity (Aadhar Card, Voter ID, Passport, or Driving License)
    • Address Proof (Bank Statement, Utility Bill, etc.)
  2. For the Registered Office:
    • Proof of Address (Rent Agreement, Utility Bill, or Property Tax Receipt)
    • NOC from the property owner (if the office is rented)
  3. Other Documents:
    • Memorandum of Association (MOA) and Articles of Association (AOA)
    • List of directors and shareholders with their consent

Post-Incorporation Compliance for a Public Limited Company:

  1. Statutory Meetings:
    • A public limited company must hold an Annual General Meeting (AGM) every year and must submit annual returns to the Registrar of Companies (RoC).
  2. Audits and Filings:
    • The company must appoint a qualified auditor and submit audited financial statements every year. It must also file annual returns with SEBI (if listed) and the RoC.
  3. Board Meetings:
    • A minimum of four board meetings must be conducted each year, and all meetings must be recorded and reported to the shareholders.
  4. Compliance with SEBI Guidelines:
    • If the company is listed on a stock exchange, it must comply with SEBI regulations related to stock offerings, disclosures, insider trading, and corporate governance.

Conclusion:

A Public Limited Company is an ideal business structure for companies looking to raise substantial capital from the public and operate on a larger scale. With access to stock markets, increased transparency, and limited liability, public limited companies can grow rapidly. However, they must adhere to stringent regulatory requirements and ensure continuous compliance with the law. The transparency and ease of transferability of shares make public limited companies a preferred choice for large businesses aiming for long-term sustainability and expansion.