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PUBLIC COMPANY
A Public Company is a concept which is very similar to Private Company, apart from few characteristics. However, a major positive for a Public Company is that there is no upper limit with regard to the number of shareholders that can form part of the Public Company. This feature helps the Company to raise adequate capital for the Company to expand its operations in different horizons. One of the most popular way to raise capital by Public Companies is by way of Initial Public Offer (IPO). In contrast to Public Company, a Private company can never come with an IPO.
Following is the comparison between a Public Company and Private Company, based upon certain features:
|
Basis |
Private Company |
Public Company |
| Minimum Share Capital |
Rs. 1,00,000 |
Rs. 5,00,000 |
| Number of members |
Minimum: 2 |
Minimum: 7 |
| Restriction on Name of Company |
Name should end with “Private Limited” |
Name should end with “Limited” |
| Issue of Securities |
By way of Right Issue or Bonus Issue or by way of Private Placement |
To Public through Prospectus (“Public Offer”) or by way of Right Issue or Bonus Issue or through Private Placement |
| Minimum number of Directors |
Two |
Three |
Features
- Board of Directors: Public limited companies are headed by a board of directors. It shall comprise of a minimum number of 3 Directors and a maximum of 12 (can be increased to 15). They are elected by shareholders and act as their representatives in the management of the company.
- Number of Members: A public limited company should have a minimum of 7 shareholders, with no limit on maximum number of shareholders.
- Minimum Paid up capital: It must have a minimum paid-up capital of Rs 5 lakh or such higher amount which may be prescribed from time to time.
- Name– It is mandatory for all the public companies to use the word “Limited” after its name.
- Statutory Audit: A public company shall require to gets its accounts audited every year by appointing a statutory auditor as per the relevant provisions of the Act.
Advantages:
- Limited Liability- Each member or shareholder has a limited liability. It means that in case of loss, the shareholders are liable only to the extent of their share. Their personal assets cannot be used for company’s benefit.
- Ease to raise capital- Since there is no upper limit on the number of shareholders, it can add as many members, leading to increased capital base of the Company.
- Perpetual succession– Company’s identity is different from its owner. Therefore death, insolvency, or bankruptcy of any of its members has no impact on company’s existence.
- Better reputation- Since a Public Company is required to get its accounts audited as per the provisions of the Companies Act, it drastically improves the trust of the clients and other stakeholders on the Company.
- Separate legal assistance- The private company has a separate legal existence from that of its owners. It can own property and sue and be sued.
- Lower tax rates- Companies having turnover upto Rs 50 crores are taxable at the rate of 25% from the financial year starting April 1, 2017.
Steps for incorporation of Public Company
Checking the name availability of the Company and applying to ROC for obtaining the approval of the name.
Applying for the DIN and digital signatures of the Directors of the Company.
Drafting of the Memorandum and the Articles of association of the Company.
Filing of the all the relevant documents with the ROC and obtaining the Certificate of Incorporation of Company.
Opening the bank account and applying for PAN/ TAN/ other registrations.
Documents Required
- DIN of all the directors of a proposed company;
- DSC – Digital Signature Certificate for all the Directors;
- PAN of all the Directors;
- Identity proof of all the directors;
- Copy of the bank statement/ electricity bill/ telephone bill of the place of business
- NOC from the landlord, in case of rented premises;
- Copy of telephone bill/ electricity bill/ gas bill, etc as proof of place of business;
In case of foreign partners, following shall additionally be required:
- Notarized/ Apo stilled copy of the Passport;
- Notarized/ Apo stilled copy of the address proof i.e. driving license/ bank statement, etc;
- Notarized/ Apo stilled copy of the residence proof i.e. electricity bill/ mobile bill, etc
Precautions to be taken while keeping the name of the Company
- The name of the Company should end with “Limited” in case of Public Company and “Private Limited” in case of Private Company. Specific exemption has been given to section 8 Companies.
- Proposed name should NOT be identical with another existing name of the Company.
- Certain words such as India, Prime Minister, President, etc shall not be used in the name of the Company.
- It is not necessary to reflect the object of Company in Name of the Company.
- Company can be incorporate with the abbreviated word of the name of the promoters.
- It is prohibited to use certain emblems and names in an improper way.
FAQ’s
1. What is the basic qualification to be a Director in a Public Company?
– The Director needs to be over 18 years of age and must be a natural person. Foreign nationals can also be directors in an Indian Public Limited Company. However, out of the 3 directors, atleast 1 should be an Indian resident.
2. Can a Company have any name?
– Yes, Company can be given any name provided it should comply with the rules as laid down in the Companies (Incorporation) Rules, 2014.
3. Is it mandatory to have DIN and DSC by Directors?
– Yes. DIN is a unique identification number that is required for all the Directors and DSC is required for the Directors to sign the forms electronically.
4. Can a Foreign National or an NRI hold shares of a Public Limited Company?
– Yes, a Foreign National or an NRI Foreign Companies can hold shares of a Private Limited Company subject to Foreign Direct Investment (FDI) Guidelines.
5. Do all Public Companies have their securities listed on the stock exchange?
– No. Only Public Companies, which satisfy certain conditions, have the option to list their shares on the recognized stock exchange. However, it is not necessary that all the public companies have their shares listed on the Stock exchange.
6. Is it mandatory to have a proper place of business to incorporate a Company?
– No it is not mandatory to have a proper place of business to incorporate a Company. However, you shall need to have a place which shall act as the Registered Address of the Incorporated Company.
7. What is the due date of Income Tax Return filing in case of Companies?
– For Domestic Companies: September 30 of each year For Companies governed by Transfer Pricing provisions: November 30 of each year.
8. What shall be the date of Incorporation of the Company?
– The date of issuance of Certificate of Incorporation of the Company shall be the date of incorporation of the Company.
9. Is it necessary for the Company to get the books of Accounts audited by the statutory auditor?
– Yes, as per the provisions of the Companies Act, 2013, all companies shall need to get its accounts audited by the Statutory Auditor, who shall be Chartered Accountant or a Company of Chartered Accountant.
10. What is the current rate of tax in case of Companies?
– Before April 1, 2017:
All companies: 30% as increased by surcharge and education cess
After April 1, 2017:
Companies having turnover < Rs. 50 crores: 25% as increased by surcharge and education cess.
Companies having turnover > Rs. 50 crores: 30% as increased by surcharge and education cess.
Other auxiliary services provided by us with regard to setting up of business:
- Obtaining DIN for the Directors;
- Obtaining DSC for the Directors;
- Opening of the bank account for the Company;
- Applying PAN and TAN of the Company;
- Registration under GST/ service tax/ VAT/ Excise/ PF/ ESI;
- Review and maintenance of records as required under GST/ service tax/ VAT/ Excise/ PF/ ESI;
- Applying for Import/ export code;
- Assisting the clients in getting loans from the bank;
- Book-keeping services;
- Filing of TDS/ GST/Service tax/ VAT/ Excise returns;
- Computation of income tax and filing of Income tax returns;
- Filing of other forms as required by MCA;
- Maintenance of statutory registers/ minutes of the meetings;
- Filing of annual returns with MCA;
- Providing internal audit services;
- Assisting in finding CA’s/ lawyers/ CS and other solicitors for your work;
- Registration of Copyrights, trademarks and patents;
- RBI approval for foreign companies investing in India and FIPB approval.