A Public Limited Company is a separate legal business entity having limited liability. The securities of Limited companies are traded on a stock exchange. Anyone can buy and sell shares of Public Limited Company. As per Company Law, 2013 a Public Company has to compulsorily present its financial stats and position publicly to maintain transparency. Furthermore, it enjoys huge benefits like
- Limited liability,
- Borrowing capacity, etc.
Characteristics of Public Limited Company
- Paid Up Capital:
- According to the Companies Act, 2013, a Public company in India should have a minimum paid-up capital of Rs. 5 lakhs.
- Limited Liability:
- One of the key benefits is limited liability. It means that the liability of the shareholders in case of loss or debts is only to the extent of investment they have made in the company. However, this characteristic does not offer immunity to the shareholders. Further, the shareholders will be responsible for their own illegal actions.
- It is a compulsory requirement for all public companies to add the word ‘limited’ after their name.
- It is a comprehensive statement of the affairs of the company. Furthermore, it is mandatory for a public company to issue a prospectus
Disadvantages of Public Limited Company
Though Public Company is an excellent option for the entrepreneurs who lack capital for starting a business, it also has certain drawbacks:
- More Regulations:
- A company has to follow more laws and regulations applicable to it which is a hefty task. Therefore it becomes difficult to cope up with such regulations.
- Ultimately, a company has to go public to work as a Public Company. Therefore the loss of ownership leads to the loss of control over the decision making of the company.
- Disclosure of Company’s Financial Position:
- It has to disclose the complete and true financial health of the company in front of the public. Thus, to assure a high level of transparency.
- The public company has to pay dividends to its shareholders. Therefore it entitles each one of them a tiny proportion of that profit.
Shareholders are the owners of a Public company. However, they appoint a board of directors who control and make decisions about the business.
There should be minimum 7 shareholders and 3 Directors to set up a Public Limited Company. Above all, Directors can also be shareholders. Furthermore, the minimum paid-up share capital should be Rs. 5 lakhs.
Yes, an NRI or Foreign National can also be a shareholder or director in a public company of India. However it should possess a DIN issued by MCA.