Public limited company Definition - Full Explain

public-limited-company-definition

Public Limited Company: Definition, Features, Advantages or Disadvantage | Fully Explain

Today we will talk about public limited companies. Here we will discuss the features of a public limited company, what are the advantages and disadvantages of a public limited company. And we will give you bonus tips on what kind of business and what kind of company should start a public limited company.

What is the concept of public limited company?

Public means public can participate in the general public. That means that the number of shareholders can be much higher, so it is called a public limited company.

Whenever I hear the name of a public limited company, the word limited will be written after it. Example Ltd., e.g. When you hear the name of a private limited company, the private writing at the end of that company is implied, such as XYZ Private Limited. Again when you hear the name of a Limited Liability Partnership Company LLP is added at the end like XYZ LLP. You can tell from the name what kind of company it is.

Governing Rules

For example, Companies Act 2013 is applicable on private limited companies. The Companies Act 2013 is also applicable to public limited companies. Most of the rules and regulations are applicable to Advantage Private Limited Company, all of them are applicable to Public Limited Company. In addition, public limited companies have some extra advantages and some disadvantages.

Public limited company Advantage

Limited liability

We have already said about Limited Liability, from there you can find out in Details. If I tell you, the liability of the shareholder is limited to the amount of capital that the shareholder has invested in a company. The shareholder's personal assets are not liable. Even if you take a look at the previous posts, then you will understand in detail.

Member and Director

Minimum Director 3. And with that the minimum shareholder 7. The minimum shareholder of a public limited company is 7, but there is no limit to the maximum shareholder. Because the general public can have a large number of shareholders here, if the company is registered on the stock exchange.

Stock exchange

Public limited companies can be listed on the stock exchange. You can take money from the public if you list on a stock exchange. Because when your company is listed on the stock exchange, the general public has to participate. To be a shareholder of your company.

Perpetual Succession

Perpetual Succession means that this company will continue to exist whether it has a shareholder or a director or not. That shareholder or director can be replaced. Those shares are transferable. If a shareholder or director dies or if for some reason the shareholder dies, the company does not close, the company continues as before. This is the Perpetual Succession Concept. It is applicable in a private limited company and with it in a limited liability partnership.

Public limited company Disadvantage 

High Compliances

First of all, the compliances of public limited companies are much higher. Since the transparency of a public limited company is more then its requirement becomes more. And with that, managing & operating a public limited company is expensive.

Example:

  1. Annual General Meeting
  2. Financial Statements
  3. Annual Return
  4. Income Tax Returns
  5. Secretarial Audit Report
  6. Compliances under all Rules and Regulations associated with SEBI

Management control

When you run an LLP or a private limited company, you can take what you are giving very fast. Because there are two or three shareholders or they are in management and they can make a decision very quickly. But in a public limited company there are many independent directors under the board of directors but there are still many SEBI requirements, so the board of directors is completely independent of the shareholder. Even if someone owns 70% of the shares, all the shareholders have to abide by the decision of the board of directors. On the one hand, we want to say that decision making becomes a little slow.

Bonus Tips:

We will say that the private limited company has reached a good scale and its turnover is in crores. And a company that wants to expand its business should be able to meet the requirements of a public limited company. Such a company should be registered as a public limited company.

And if you want to start a business, it may not be good for you to start a public limited company. It would be best for you to start a private limited company or if you want fewer companies from a private limited company then you can do LLP. For this you can see the post about our private limited company and LLP, we have told you what is the advantage and what is the disadvantage.

You can contact us if you want to know more about Public Limited Company.