Public Limited Company (PLC) in India – Complete Guide

1. What is a Public Limited Company?

A Public Limited Company (PLC) is a type of company that can offer its shares to the public and is suitable for businesses that plan to raise capital from the public through the stock market.

Key Features:

• Can have minimum 7 members (shareholders) and unlimited maximum.

• Minimum 3 directors required (for private company, minimum is 2).

• Shares can be traded publicly on stock exchanges after issuing IPO.

• Separate legal entity: The company has a distinct identity from its shareholders.

• Limited liability: Shareholders’ liability is limited to the extent of their investment.

Legal Reference: Governed by Companies Act, 2013 (Sections 2(71), 2(68), 3, 12).

2. Characteristics of a Public Limited Company

3. Advantages of a Public Limited Company

1. Ability to Raise Large Capital: Can issue shares to the public via stock exchanges.

2. Limited Liability: Shareholders’ personal assets are protected.

3. Separate Legal Identity: Can own assets, enter contracts, and sue in its name.

4. Perpetual Succession: Continues even after death of shareholders.

5. Credibility and Market Presence: PLC status enhances trust with investors, banks, and clients.

6. Expansion Opportunities: Easier to scale due to access to public funds.

7. Ownership Transfer: Shares can be easily bought/sold by investors.

4. Disadvantages of a Public Limited Company

1. High Regulatory Compliance: Must comply with stricter MCA, SEBI, and RBI norms.

2. Costly to Set Up: Higher registration and professional fees compared to Private Limited or OPC.

3. Disclosure Requirements: Financial statements, annual reports, and board meetings are publicly accessible.

4. Management Complexity: Requires larger board and structured governance.

5. Risk of Takeover: Shares are publicly traded, so ownership may change without the founder’s consent.

5. Eligibility Criteria

To form a Public Limited Company in India:

• Minimum 7 members/shareholders.

• Minimum 3 directors, all with DIN (Director Identification Number).

• Indian residents can be shareholders and directors.

• Must have minimum paid-up capital of ₹5 lakh.

• Name must be unique and approved by MCA.

6. Steps to Register a Public Limited Company

1. Obtain Digital Signature Certificate (DSC) for all directors.

2. Apply for Director Identification Number (DIN) for each director.

3. Name Approval (RUN Service): Reserve a unique company name with MCA.

4. Draft Memorandum of Association (MOA) and Articles of Association (AOA):

   • MOA: Defines objectives of the company.

   • AOA: Defines governance and operational rules.

5. File Incorporation Forms (SPICe+ Form): Submit company details, directors, capital, registered office.

6. Certificate of Incorporation (COI): Issued by MCA; includes Corporate Identity Number (CIN).

7. Apply for PAN and TAN: Tax identification for the company.

8. Open Bank Account in the company’s name.

9. Issue Share Certificates to initial shareholders.

10. Apply for GST Registration if turnover exceeds threshold.

7. Compliance Requirements for Public Limited Company

8. Taxation of Public Limited Company

• Corporate Tax Rate: 25% for companies with turnover ≤ ₹400 crore; 30% for others.

• Dividend Distribution Tax (DDT): No longer applicable; dividends taxed in hands of shareholders.

• Eligible for presumptive taxation schemes for small companies (if applicable).

• Must deduct TDS on certain payments as per Income Tax Act.

9. Documents Required for Public Limited Company Registration

10. Public Limited vs Private Limited Company

11. Advantages for Investors

• Public listing allows easy liquidity via stock market.

• Transparency ensures trust and accountability.

• Dividend income and capital gains are available.

• Board oversight protects shareholder interests.

12. Industries Suitable for Public Limited Companies

• Large-scale manufacturing and export businesses

• IT and software companies planning IPO

• Banking and financial services

• Pharmaceutical and healthcare companies

• FMCG, retail chains, and energy sectors

13. Costs of Formation

14. Frequently Asked Questions (FAQs)

Q1: Can a Public Limited Company be converted from a Private Limited Company?

• Yes, by complying with MCA regulations and increasing the minimum members to 7.

Q2: Can an NRI invest in a PLC in India?

• Yes, under FEMA regulations, NRIs can invest as shareholders.

Q3: Is listing on a stock exchange mandatory?

• No, a PLC can remain unlisted, but it can raise funds from the public via IPO/FPO when listed.

Q4: How often must a PLC hold AGMs?

• Once every year as per Companies Act 2013.

Q5: What is the minimum number of directors for a PLC?

• Three directors are required at the time of incorporation.

15. Raising Capital and IPO Process

A Public Limited Company can raise funds in several ways:

1. Initial Public Offering (IPO)

   • Shares offered to the general public for the first time.

   • Requires SEBI approval and a prospectus detailing the company’s financials.

2. Follow-on Public Offering (FPO)

   • Subsequent share issue after IPO to raise additional funds.

3. Private Placement

   • Shares offered to a selected group of investors.

4. Rights Issue

   • Existing shareholders are given the right to buy additional shares in proportion to their holdings.

5. Debentures/Bonds

   • PLCs can issue convertible or non-convertible debentures to raise debt.

Advantages for the company: Access to large-scale funding, higher credibility, and opportunity to expand operations nationally or internationally.

16. SEBI Regulations for Listed PLCs

If the PLC is listed on a stock exchange, it must follow SEBI (Securities and Exchange Board of India) regulations:

• Mandatory disclosure of quarterly and annual financial statements.

• Compliance with Listing Obligations and Disclosure Requirements (LODR).

• Insider trading restrictions for directors and shareholders.

• Corporate governance requirements like independent directors and audit committees.

• Minimum public shareholding of 25% for listed PLCs.

17. Corporate Governance in Public Limited Companies

Public Limited Companies must follow strict governance norms:

1. Board of Directors – Minimum 3, with at least 1 independent director if publicly listed.

2. Audit Committee – Reviews financial reporting and internal controls.

3. Nomination & Remuneration Committee – Determines director compensation.

4. Stakeholder Committee – Ensures shareholder interests are protected.

5. Risk Management Committee – Monitors and manages corporate risks.

Benefit: Strong governance builds investor confidence and compliance with laws.

18. Dividends and Profits

• PLCs can distribute profits as dividends to shareholders.

• Dividends are declared by the Board of Directors and approved in the AGM.

• Dividend payments can be interim or final.

• Dividends are taxed in the hands of shareholders, not the company.

19. Differences Between Listed and Unlisted Public Limited Company

20. Statutory Reserves

Public Limited Companies are required to maintain certain reserves:

• General Reserve – Set aside from profits to strengthen company finances.

• Capital Redemption Reserve – Required when redeemable preference shares are issued.

• Debenture Redemption Reserve – Required for debt obligations like debentures.

21. Mergers, Acquisition & Takeovers

• PLCs are eligible for mergers and acquisitions, which is restricted for Private Limited Companies.

• Listed PLCs must follow SEBI Takeover Code 2011 during acquisitions.

• Provides exit opportunities for investors and growth for the company.

22. Minority Shareholder Rights

• Right to vote at general meetings.

• Right to receive dividends.

• Right to inspect company records.

• Right to sue in case of oppression or mismanagement.

• Protection against unfair practices under Companies Act 2013.

23. Industry Examples of Public Limited Companies

• IT & Tech: Infosys, Wipro, TCS

• Banking & Finance: State Bank of India, HDFC Bank

• Pharma & Healthcare: Sun Pharma, Cipla

• Manufacturing: Tata Motors, Reliance Industries

• FMCG: Hindustan Unilever, Nestle India

Takeaway: PLCs are suitable for large-scale operations, high investment, and public fundraising.

24. Penalties for Non-Compliance

Non-compliance with the Companies Act 2013 or SEBI regulations can lead to:

• Fines on the company and directors

• Imprisonment in serious cases

• Disqualification of directors

• Restrictions on raising funds or issuing shares

Hence, PLCs must maintain strict compliance to avoid legal consequences.

25. Optional Services for PLCs

For smooth operations, PLCs often need:

• Chartered Accountant (CA) Services – Auditing, compliance, taxation

• Company Secretary (CS) – Filing, board meetings, legal notices

• SEBI Compliance Advisory – For listed companies

• Investor Relations (IR) Management – Managing shareholders and communications

• Legal Advisory – Contracts, agreements, intellectual property