Everything about Public Limited Company Registration in India
Private limited company
A businessman has many options of company registration in India like a sole proprietorship, partnership firms, Limited Liability Partnerships, and limited companies.
In the case of limited companies, again there are 2 options available for company registration i.e
- Private limited company registration and
- Public limited company registration.
Further, it may be noted that when foreign company’s wants to enter into India in form of an incorporated entity, they may do so in the following manner:
- Subsidiary Company Registration in India or
- Wholly owned subsidiary company or
- Limited Liability Partnership
While the majority of small businesses in India prefer Private Limited Company Registration, however, when the vision of any company is big and wants to expand in the future by raising money from the general public, they normally opt for public Limited company registration in India.
In this write-up, we will be discussing the advantages and disadvantages of public limited company registration in India.
Let us first understand what is a public limited company?
As per Companies Act, 2013, Public limited company means a company which is not a private limited company.
Also, as per Companies Act, 2013, private company means a company which impose restrictions on the right to transfer its shares through its article of association and which limits the maximum number of its members to 50.
Therefore, public limited company can transfer its shares to general public and there is no restriction in number of its members.
Major Differences between Private Limited Company and Public Limited Company
- Public limited companies have minimum 7 members where as private limited companies have minimum 2 members.
- Public limited companies have minimum 3 Directors where as Private limited companies have minimum 2 Directors.
- Public limited companies can list their shares in recognized stock exchange and open them for public trading where as shares of private limited companies cannot be listed on stock exchange. Also, they are not open for public trading. Its shares are held privately by its members.
- Public limited company compulsorily requires the issue of prospectus or statement in lieu of prospectus. No such things required in case of private limited companies.
- Holding of statutory general meeting of members is compulsory in case of public limited company; however, it is not mandatory for private limited company.
- Public limited company’s shares are freely transferable where as there is restriction in transfer of shares of private limited companies.
- Cost of Public limited company registration in India is slightly more as compare to cost of Private limited company registration in India.
- Number of regulatory compliance is very high in case of public limited companies as compared to private limited companies.
- In case of public limited company, appointment of whole time company secretary is mandatory in case amount of paid up capital increases Rs 500 lac where as in case of private limited companies, it is not mandatory to appoint such company secretary.
Advantages of Public Limited Company Registration in India
Following are the advantages of public limited company registration in India
- Public limited company can raise money from general public as well as from institutional investors by listing its shares in recognized stock exchange. This allows public limited companies to raise huge amount of capital which is not possible in case of private limited company.
- Since money is raised from large pool of shareholders, no single person or group of people have majority ownership/control of company. In case of private companies, angel investors or Venture capitalist invest and then acquire major control in the company.
- The shares of public limited companies are easily transferrable and provides huge liquidity which is not possible in case of private limited companies.
- Since public limited companies are subject to huge regulatory compliance and periodical audits, Banks and other financial institutions are more comfortable in providing debt funding to listed public limited companies. Also, such companies can negotiate with bankers for better repayment terms on loans and beneficial interest rates.
- Since public limited companies has access to huge funds and capital, they may make feasible plans for organic and inorganic growth and expansion.
- Public limited companies enjoy brand and reputation which is far more than private limited companies. They also enjoy attention from media and investors which leads to better brand recognition and more sales of its products and services.
- It is suitable for foreign company registration in India in the form of subsidiary company.
- The promoters of public limited companies can easily exit from business by selling its stakes in future.
Disadvantages of Public Limited Company Registration in India
Following are the disadvantages of public limited company registration in India:
- Public limited companies are subject to huge regulatory compliance whether it is before ROC or FEMA or SEBI as compared to private limited companies.
- Cost of private limited company registration is less as compared to public limited company. Public limited companies requires minimum authorized and paid up capital of Rs 5 lac which involves higher ROC fees and professional fees as compare to private limited companies. Further, huge costs are involved at the time of listing of public limited companies.
- There is higher level of transparency required by Public limited companies as compared to private limited companies. The financials of public limited company are analyzed by lot of stake holders like bankers, shareholders, investors and media.
- Unlike private limited companies, where promoters have control over shareholders, in case of public limited companies, the original owners or promoters does not have control over shareholders. Further, institutional investors/shareholders often exercises high levels of control and influence, and sought their active participation in decision making to safeguard and get proper return for their investment.
- Since shares are freely transferrable, public limited companies are more vulnerable for hostile takeover in case majority of shareholders exercise their power to bid.
The procedure of Public limited company registration in India
Following steps are involved in public limited company registration in India:
- Obtain Digital Signature certificate (DSC) of all the Directors
- Apply to ROC/MCA for reservation of name of proposed company
- Drafting the charter documents of company i.e MOA and AOA of company and also signed the same and thereafter same need to be attached with online form to be submitted with ROC. The MOA and AOA needs to be e-filed and e-stamped.
- Simultaneously, apply for obtaining Director Identification Number (DIN)
- Obtain Certificate of incorporation of Company which singed digitally by ROC
- Post incorporation, bank account needs to be opened and share subscription money needs to be contributed by all the shareholders.
- In case where public limited company has been incorporated as wholly owned subsidiary company, when parent company subscribes shares of Indian Subsidiary and contributes share capital in Indian bank account, it is considered as Foreign Direct Investment in India (FDI). Also, RBI needs to be intimated of such receipt of FDI by filing necessary forms like FCGPR etc.
- GST registration and Import Export License needs to be taken , if applicable.
- Company also needs to apply for certificate of commencement of business.
- First auditors of company needs to be appointed within 30 days of company formation in India.
Compliances to be done by every Public limited company
Post Company Registration in India, every public limited company has to do following compliances.
- Filing of Income Tax Return of the company on annual basis
- Filing of GST returns of the company on monthly/quarterly basis
- Filing of TDS returns of the company on quarterly basis
- Conducting statutory audit and obtaining report from CA
- Conducting Tax Audit and uploading of report to Income Tax Department
- In case of International transaction between associated enterprises, conducting Transfer Pricing Audit and uploading with tax department.
- Filing of annual returns with ROC
- Filing of forms with RBI in case of foreign funding received from parent company.
- Secretarial compliance before ROC and RBI, SEBI
Besides above, following compliance need to be done under SEBI (Listing Obligations and Disclosure Requirements) regulations, 2015
- Listed entity (including its subsidiaries in India) shall undertake secretarial audit within 60 days from the end of financial years
- Listed entity requires to submit to stock exchange and publish on website of company, a copy of Annual report and along with the notice send to the shareholders
- Voting result of General meeting submitted within 48 hours from adjourned of general meeting
- Annual disclosure on incremental borrowing by large business borrower’s from the end of 30 days of financial years
- Large corporate borrowers submit Initial Disclosure on Classification as large corporate borrowers.
- Also submit annual disclosure for incremental borrowing by large corporate borrowers
- Intimation to appointment of new share transfer agents within 7 days from the commencement of agreement.
- Give advance Notice of Boards meeting to considers the agenda like Buy-Back of securities, fund raising, issue bonus shares, voluntary delisting, declaration of dividends, issue of convertible shares
- The listed company has to intimate to the recognized Stock Exchange about the material events which will have effect on the performance of the company as well as price sensitive information both at the time of occurrence of the event and subsequently after the cessation of the event.
- The listed entity will first disclose to stock exchange(s) of all events, or information as soon as reasonably possible
- Report on AGM within 30 days
- Maintain updates on website of the company within 2 working days, etc.
- For the transparency and fair disclosures, the govt. of India introduced a new regulation named SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. Under the regulations of SEBI (LODR) a listed company shall disclosed all materials information and events to the stock exchange as far as possible and not later than 24 hours from the occurrence of information and events.
Advantages of Public limited company registration in Delhi NCR
- Reserve Bank of India, Department of Industrial Planning, Ministry of Commerce and Finance, Foreign Investment Policy and Promotion Board etc are situated in New Delhi.
- All the major central ministries, departments, presidential palace, cultural centers and tourist places are situated in Delhi. Major economic and financial decisions are taken in Delhi.
- Delhi is the home of many startup companies. Every year thousands of new start-ups are setup and many companies are registered.
- The territory of Delhi touches the state of Haryana and Uttar Pradesh which contribute major part in Indian economy. Delhi has best connectivity with the rest of India with Rail, Road and Air.
- There are about 30 major economic and industrial places around the Delhi. The key industries include hotel, tourism, Information technology, media, Telecommunication and banking.
All the aforesaid reasons make Delhi NCR an ideal jurisdiction for company registration in India.