Public limited Company

Public limited Company

A public limited company, also known as a PLC, is a company structure available to businesses in the UK. Unlike the other structures such as sole trader and partnerships, the business exists as a separate entity to the owners, offering protection from liabilities and debt.

Public limited company definition

A public limited company is a business that is managed by directors and owned by shareholders. A public limited company can offer shares to the public. There are also other obligations that a PLC must meet due to being public, including further admin regarding tax, and making their financial reports public so would-be shareholders have all the information they need before investing. A public limited company is also listed on the stock market and essentially needs to be more open and public about its details than a private company.

Requirements for registering a Public Limited Company

Some various rules and regulations are prescribed under the Companies Act,2013 for the formation of a Public Limited Company in Inia. Here is a checklist one should know of while registering a Public Limited Company:

• Minimum 7 shareholders are required to form a Public Limited Company.
• A minimum of 3 Directors is required to form a Public Limited Company.
• A minimum share capital of Rs.5 lakh is required.
• DSC of one of the Directors is needed when the self-attested identity copies and address proof are submitted.
• DIN for the Directors is necessary.
• Application is to be made for the selection of the Name of the Company.
• An application that comprises the main object clause of the company is made. This object clause will define the main objectives of a Company after the incorporation.
• The application is submitted to the ROC along with the necessary documents like MOA, AOA, a duly fille form DIR-12, Form INC 7, and Form INC -22 is needed.
• Payment of the registration fees that are prescribed by the ROC.
• Once the ROC has approved the company should apply for the business commencement certificate.

Annual Compliances for a Public Limited Company

Unlisted Company

• Board Meetings: An unlisted Public Limited Company is required to hold at least 4 board meetings in compliance with Section 173 of the Companies Act,2013.
• Appointment of a Cost Auditor: The auditor is required to be appointed as per Section 148(3) along with Rule 6(2) and Rule 6(3A) of the Companies Rules,2014. For this form, CRA 2 is to be filed. It is pertinent to mention that the original appointment of the auditor should be done within 30 days of the Board meeting or 180 days of the financial year, whichever is earlier. When a casual vacancy arises the same is to be filed within 30 days.
• Return of Deposits: Returns of deposits have to be filed with the ROC under whose jurisdiction the company falls via Form DPT 3 in compliance with rule 16 of the Companies (Acceptance of Deposit) Rules,2014.
• Appointment of CFO or CS or CEO: Section 203 read with Rule 8 and Rule 8A of the Companies Rules,2014 requires the appointment of the CFO or CS or CEO within 30 days of the AGM or 6 months in case of the casual vacancy. Form MGT 14 or Form DIR 12 are filed.
• Annual General Meeting: AGM for the declaration of the dividend has to be conducted in compliance with Section 96 of the Companies Act, 2013.
• CSR Committee: CSR Committee has to hold four meetings with a gap of not less than 120 days between the two meetings held for discussion and approval of the CSR activities. This is done under the Companies Act,2013 read with Companies Rule,2014 and Secretarial Standard.
• Director’s Disclosure: Directors are required to disclose any financial interest in the Company via Form MBP 1 in compliance with Section 184(1) of the Companies Act,2013 read with Rule 9(1) of the Companies (Meetings of Board and its Powers) Rules,2014.

Listed Company

• Annual General Meeting: Annual General Meeting has to be held following Section 121(1) of the Companies Act, 2013. Form MGT-15 has to be filed once the AGM has been conducted
• Financial Statements: The Financial Statements of the Company have to file as per Section 137 of the Companies Act,2013, read with Rule 12(2) of the Companies (Accounts) Rule,2014. The Financial statement consists of the balance sheets, cash flows statements, Director's statement, Director's report, Auditor's report, and the combined financial state, meaning which is prepared in XRBL (Extensible business reporting system). This is filed via Form AOC 4
• Annual Return: This has to be filed following Section 92 of the Companies Act.2013 read with the Rule 11(1) of the Companies (Management and Administration) Rules,2014. The Annual return contains the information about the directors and shareholders and is required to be filed in Form MGT7 with the relevant ROC.
• Limited Liability Businesses (LLCs)
• Financial and Director’s Report: Adoption to the financial and director's report is to be done in consonance with Section 173 of the Companies Act read with the Secretarial standard 1. The filing is done via form MGT 14.
• Income Tax Returns: This is to be filed with the Tax department in form ITR 6 on or before September 30th of the financial year
• Secretarial Audit Report: Submission of the Secretarial report is a requirement under Section 204 of the Companies Act,2013 read with Rule 9 of the Companies Rules,2014. The secretarial report has to be submitted only when the Company's total paid-up capital is equal to or crosses Rs. 50 crores or the annual turnover is equal to or exceeds INR 50 crores or the annual turnover is exceeding Rs.250 crores. This filing did via Form MR 3
• Other compliances: These include the rules and regulations that are laid down by SEBI. The listed Companies have to comply with the regulations of 2015.

Is a limited company private or public?

A public limited company is public, that means that anyone can buy shares in the company. However, private limited companies (Ltd) exist and are, in fact, one of the most popular business structures in the UK. Most public limited companies will have started as private limited companies, and then turned public once they grew. This is because a private limited company needs to have share capital with a value of £50,000 to be eligible to go public, and so a period of business growth is needed by most companies to reach this threshold. The company will also need 75% of the shareholder votes in favour of going public, and the correct paperwork will need to be forwarded to Companies House.

Public limited company advantages and disadvantages

Businesses choose to become a public limited company because the pros of this new structure outweigh the cons. There are several big advantages to going public, but the change also requires significant changes to the management structure.

Advantages of public limited company

• The company can raise capital through share sales
• This raised capital can fund expansion and new opportunities
• Capital can also be used to pay off debt
• Publicity increases brand awareness
• Listing on the stock market can increase company reputation and prestige
• Public records can make it easier to attract business partners
• Sense of transparency can improve customer perception of brand

Disadvantages of public limited company

• Two directors are needed for a PLC, whereas a Ltd only needs one
• More regulated both for taxes and Companies House
• HMRC tax deadlines are shorter for public companies
• Unlike Ltd’s company secretaries, a PLC’s company secretary must be fully qualified
• Shareholders can be anyone who chooses to purchase, which can dilute a unified company vision
• More vulnerable – the more shareholders there are, the more power has been distributed
• A public limited company must hold an annual general meeting

When should businesses become a public limited company?

There is no obligation for businesses to eventually become public. Many businesses remain private for their whole lifespan. Most businesses that do become a public limited company are well established, with a solid management structure, and so are well-placed to buffer the potential risks that come with going public.

Can a public limited company become a private limited company?

Yes, a business can reverse its decision to go private by filling out the correct form and submitting it to Companies House. The decision to change back is usually because the benefits of being a public limited company no longer outweigh the disadvantages.

What are the characteristics of public limited companies?

Public limited companies have certain characteristics that distinguish them from other forms of business ownership. Let’s get to know these distinguishing features.

Limited liability

What is limited liability? Limited liability effectively means that the owners of a public limited company cannot be held liable for any of the debts incurred by the entity. The following example will explain things better.

Let’s say that a public limited company defaults on a loan. In such a situation, the lenders can only hold the company accountable for repayment of the loan. In no case can they go after the owners and force them to repay the debts incurred by the company. The owners here are legally protected by law from being personally held accountable. This is not the case with sole proprietorships or partnerships.

Transparency

With public limited companies, almost everything is transparent and open to public knowledge. Right from their financial statements down to a change in their management composition, the information is accessible to the public.

Transferability of shares

With respect to public limited companies, the shareholders are free to buy and sell the shares to anyone. So, if you hold shares in a public company, you can trade them through the stock market, provided the public limited company is listed on it. Alternatively, you can also sell the shares to a specific individual or an entity outside the market, irrespective of whether the company is listed or not.