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Public Limited Companies

By News Canvass | Jun 22, 2023


  • Limited Liability Companies is a corporate entity that is registered and has a separate legal identity. A limited liability company can be either Public Limited Company or Private Limited Company. Public Limited companies have a separate legal identity and are considered to be distinct from their owners. This effectively means that public limited company is registered as a separate entity from its owners.

What is public limited Company?

  • Public Limited companies are owned and run by owners but still they have separate set of rules, obligations and regulations and legal rights. The owners of the public limited company are known as shareholders or stakeholders of the company. The ownership of the entity is split in to multiple units known as equity shares. The minimum of shareholders is ‘7’ which means there should be at least 7 different owners at any point of time. There is no maximum limit for the number of shareholders in Public Limited companies.


Public Limited Company is governed by the Companies Act of 2013, which defines it as a company which is not a “private company”, “has a minimum amount of capital as prescribed” and “has a minimum of seven shareholders”. The companies Act regulates the working of Public Limited Company. A  Public Limited Company offers shares to the general public and has limited liability. Its stock can be acquired by anyone, either through IPO i.e. initial public offering or via stock market. It is strictly regulated and is required to publish its true financial reports to the shareholders.

How Do public limited companies work?

  • Public Limited Company in India can be either registered or unregistered on the share market. Its completely on to them whether they want to register or not. The listing of the company on the stock market they are ordered to showcase their financial year reports and illustrate the economic condition to enrich investor and stake holders belief and also gain public trust.
  • The lifespan of the shareholder in a publicly held company doesn’t impact how long it will continue to be a firm. These businesses can be used to raise capital but also have increased regulation.

Requirements of a Public limited company

        Rules prescribed for Public Limited Company as per Companies Act, 2013 are

  • Minimum 7 shareholders are required to form a public limited company.
  • Minimum of 3 directors is required to form a public limited company.
  • A minimum authorized share capital of Rs. 1 lakh is required.
  • Digital signature certificate (DSC) of one of the directors is needed while submitting self-attested copies of identity and address proof.
  • Directors of the proposed company will need a DIN.
  • The name of the company must be as per the provision of the Company Act and Rules.
  • Documents like the Memorandum of Association (MOA), Articles of Association (AOA) and duly filled Form DIR – 12 is needed.
  • Payment of the prescribed registration fees to the ROC is required.


Public Limited Company have several advantages and other types of business entities. These advantages originate from Public Limited Company characteristics.

  1. Limited Liability:

Shareholders in a Public Limited Company have limited liability which means that their personal assets are not at risk in case the company defaults.

  1. Transferability of shares

Shares in public limited company can be easily bought and sold on a stock exchange, providing liquidity and flexibility to investors.

  1. Better Access to Government Schemes

Public Limited Companies have better access to government schemes, incentives and subsidies aimed at promoting economic growth and development.

  1. Professional Management

Public Limited Companies are usually managed by board of directors with expertise in various areas of business management.

  1. Greater Access to Capital

A Public Limited Company can raise capital by issuing shares to the public which can provide access to larger pool of investors and greater amount of funding.


Disadvantages of Public Limited Companies can sometimes make it non appealing to the investors.  By getting informed by the drawbacks of the Public Limited Company you can stay informed to take right decision

  1. Regulatory Compliance

Public Limited Companies are subject to increased regulatory compliance requirements, including financial disclosure and shareholder communication. This becomes a costly affair

  1. Dilution of Ownership

By issuing shares to the public the ownership of the company can become diluted which can lead to loss of control.

  1. Limited Control over share price

Public Limited Companies have limited control over their share price, which can be influenced by the investors sentiments and market conditions.

  1. Costly to go public

The process of going public can be costly and time consuming requiring significant legal resources

  1. Pressure to Perform

Public Limited Company are under constant pressure to perform well and meet shareholders expectations, which can create stressful work environment.

 Public limited company v/s private limited company


Public Limited Company

Private Limited company



A public limited company is a joint stock company, that is not a private company, and the shares of which are listed on a stock exchange. 

A private company is a closely held company that does not have its shares listed on any stock exchange and cannot be openly traded.



The minimum paid-up capital needed for a public limited company is Rs. 5,00,000..

The minimum paid-up capital for a private company is Rs 1,00,000

Subscription from the public

A public limited company is entitled to accept subscriptions from the general public and issue shares or debentures to raise capital.

A private limited company is not allowed to have a subscription of its shares by the general public. This implies that such a company cannot issue any shares or debentures to the general public for raising capital at any point



The minimum number of Directors in a public limited company is 3

The minimum number of Directors in a private limited company is 2

Retirement of Directors


As per the provisions of the Companies Act, 2013, at least ⅔ Directors of the common have to retire by rotation. Out of these Directors, at least ⅓ Directors have to retire each year 

A private limited company does not have such restrictions relating to the retirement of Directors by rotation.

Appointment of Directors


In a public limited company the appointment of only one Director can be done through a single resolution.

In a private limited company, two or more Directors can be appointed through a single resolution

Articles of Association

It can frame its own articles of association or adopt Table F.

It must frame its own articles of association.


5 members are required to present in person when the number of members as on the date of the meeting is 1000 or less. 15 members are required to present in person when the number of members as on the date of the meeting is more than 1000 but less than 5000.

2 members who are personally present at the meeting, constitute a quorum, irrespective of the number of members.

How to invest in Public limited company

  1. Invest through Primary Market

The primary market is where Public Companies list their securities for the first time. This can be either in the form of IPO or FPO.

  • An IPO is the process through which a company offers the stock for sale to the public for the first time, when it is newly listed on stock exchange.
  • An FPO is the process by which a company that’s already listed on the stock exchange issues fresh securities to raise additional securities.
  1. Invest through Secondary Market

In the security market securities that have already been issued are traded. Existing Shareholders may sell them to traders and investors who wish to buy those stocks. A number of financial assets like debentures, bonds , options, commercial papers and treasury bills can also be traded in the secondary market.  Here transactions happen between two different investors and not between an investor and a company as in the case of a primary market.

Examples of Public limited company

Few examples of Public Limited Company are

  1. Indian Oil Corporation Ltd
  2. Bharat Petroleum Corporation Ltd
  3. State Bank of India
  4. Hindustan Petroleum Corporation Ltd
  5. Oil and Natural Gas Corporation Ltd

Who owns Public limited Company?

Public Limited Companies are owned by shareholders and managed by Board of Directors. It offers shares to the general public. Public Limited Companies are easily accessible to public and financial reports are available to the public to know the current financial status of the company.

Features of Public limited company

  1. Separate legal entity
  • A Public Company is a business entity that has a separate identity from its members/shareholders.
  1. Easy Transferability
  • A shareholder of a public limited company can easily transfer its shares to the board of the shareholders/directors is limited to the extent of the shares owned by them. In the event of any losses or debts, the shareholders are not liable
  1. Paid-up Capital
  • For a public company to begin its operations, the minimum paid up capital required is Rs 5,00,000. 
  1. Name
  • The word “LTD”, which will be added to the end of any public company’s name, will be included in the name.
  1. Directors
  • The minimum number of Board Of Directors is 3, maximum of 12. They are elected by shareholders at the Annual General Meeting.
  • Only the Director ID Number (DIN), issued by the Ministry of Corporate Affairs, must they possess.
  1. Prospectus
  • A prospectus can be issued to invite the public to subscribe to its shares by registering a public limited company.
  • A prospectus is a statement that contains detailed information about the company as well as the number of shares requested by the company for an IPO or subsequent listing.
  1. Borrowing capacity
  • Public companies have the advantage of being able to borrow money from many sources. Public companies can issue debts (secured and unsecured) to raise money. It can also issue preference or equity shares to the public. 
  • The company can receive financial aid and loans from banks and other financial institutions.
  1. Number of members
  • There must be 7 members in a Public company, there is no upper or lower limit to this number.
  1. Voluntary Association
  • It’s easy to purchase shares in a public company, and it’s just as easy to leave the public company.
  1. Minimum Subscription
  • The minimum amount that must be received for subscriptions of shares is 90 percent of shares in the public company. The company cannot continue to operate if they are unable to pay the 90 percent amount.
  1. Minimum subscribers
  • The 7 members of the Public company are the subscribers of the Memorandum of Association of Public Company.
  1. Certificate of Commencement
  • This is a vital document that must be obtained by the public company before starting a business. The Certificate Of Incorporation is the last document needed for a private company. 
  • For public companies, both the Certificate of Incorporation and Certificate of Commencement is required.
  1. Memorandum of Association
  • The MOA, which is an important document for the formation of a public company, is essential. After completing the Articles of Association, a private company can begin its business. 
  • For a public company, the Memorandum must be submitted to MCA along with the company’s registration.
  • Section 2(56), Companies Act 2013, defines Memorandum. It outlines the main goals of the company, that is, the main business the company will be involved in.


So Public Limited Companies are entities that are registered under Indian Companies Act. They are separate legal identity and are considered to be distinct their owners. The owners of a public listed company are termed as shareholders or stakeholders of the company. Investment in Public Limited Company can be done through the primary market or the secondary market.

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