Public Company: Your Guide to Incorporation (As per Companies Act, 2013)

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1. Introduction to a Public Company

A Public Company, under the Companies Act, 2013, is a company that is formed with a minimum of 7 members and 3 directors, and it can invite the public to subscribe to its shares or debentures. Public companies are typically larger businesses with a structure suitable for raising capital from a large number of investors through stock exchanges or public offerings.

Section 2(71) of the Companies Act, 2013 defines a public company as:
“A company which is not a private company and has a minimum paid-up share capital as may be prescribed.”

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2. Why Choose a Public Company?

A public company structure is ideal for growing businesses that want access to substantial funding. Some compelling reasons include:

• Access to Capital Markets: Ability to raise funds through public issue of shares.

• Wider Ownership Base: Shares can be held by any number of investors.

• Enhanced Credibility: Higher trust from customers, lenders, and vendors.

• Growth Potential: Easier mergers, acquisitions, and business expansion.

• Perpetual Succession: Continues to exist irrespective of changes in ownership.

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3. Key Characteristics of a Public Company

• Minimum Members: 7 shareholders (no maximum limit).

• Minimum Directors: 3

• Limited Liability: Shareholders’ liability is limited to the amount unpaid on their shares.

• Separate Legal Entity: Exists independently of its members.

• Mandatory Registration: Must be registered under the Companies Act, 2013.

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4. Types of Public Companies

• Listed Public Company: Its shares are listed on a recognized stock exchange.

• Unlisted Public Company: Not listed but still governed by public company rules.

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5. Eligibility Criteria for Incorporation

To incorporate a public limited company, the following requirements must be fulfilled:

• Minimum Shareholders: 7

• Minimum Directors: 3 (at least 1 must be an Indian resident)

• Registered Office: A valid address proof in India.

• DIN (Director Identification Number): For all directors.

• DSC (Digital Signature Certificate): For filing e-forms.

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6. Documents Required

For Directors & Shareholders:

• PAN card (mandatory for Indian nationals)

• Passport (for foreign nationals)

• Aadhaar card/Voter ID/Driving License

• Address proof (Bank Statement/Utility Bill not older than 2 months)

• Passport-sized photograph

For the Company:

• Proof of registered office (electricity bill/rent agreement/NOC from owner)

• Memorandum of Association (MoA)

• Articles of Association (AoA)

• Declaration by Directors and Subscribers (INC-9 & DIR-2)

• Identity and address proof of subscribers and directors

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7. Steps to Incorporate a Public Company

1. Obtain DSC & DIN: Apply for Digital Signature Certificates and Director Identification Numbers for all directors.

2. Name Reservation: File RUN (Reserve Unique Name) on MCA portal.

3. Draft MoA & AoA: Prepare the charter documents of the company.

4. File SPICe+ Form: A simplified integrated form for incorporation (Part A for name reservation, Part B for incorporation).

5. Issue of Certificate of Incorporation: On approval, ROC issues COI with PAN and TAN.

6. Open Bank Account: Use the COI and documents to open a corporate bank account.

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8. Time Frame for Incorporation

The incorporation of a public limited company typically takes 10–15 working days, depending on document readiness and registrar processing time.

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9. Post-Incorporation Compliance

After incorporation, a public company must:

• Hold First Board Meeting: Within 30 days of incorporation.

• Appoint Auditor: Within 30 days.

• Issue Share Certificates: To shareholders within 2 months.

• File Commencement of Business: Form INC-20A within 180 days.

• Maintain Statutory Registers: As per Sections 85, 88, etc.

• Conduct Annual General Meeting (AGM): Every financial year.

• File Annual Returns & Financials: Forms AOC-4 and MGT-7.

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10. Statutory Compliance for Public Companies

• Board Meetings: Minimum 4 per year (1 per quarter)

• Annual General Meeting (AGM): Mandatory every year.

• Audit of Accounts: Compulsory audit by Chartered Accountant.

• Annual Returns: Filing with ROC and income tax department.

• Listed Companies: Additional SEBI and stock exchange compliance.

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11. Advantages of a Public Company

• Unlimited Capital Raising: Can raise funds via IPOs, FPOs.

• Limited Liability: Risk is limited to unpaid share capital.

• Brand Recognition: Enhances reputation and creditworthiness.

• Perpetual Existence: Independent of directors/shareholders.

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12. Disadvantages of a Public Company

• Higher Compliance Costs

• Loss of Control: Ownership dilutes as shares are offered publicly.

• Mandatory Disclosures: Annual filings, reports, and financial transparency are compulsory.

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13. Frequently Asked Questions (FAQs)

Q1: What is the minimum capital required for a public company?
There is no minimum paid-up capital requirement under the Companies Act, 2013, but earlier it was ₹5 lakh.

Q2: Can a public company start business immediately after incorporation?
No. It must file Form INC-20A (declaration of commencement of business).

Q3: Is it mandatory for a public company to be listed?
No. A public company may or may not be listed.

Q4: How many shareholders can a public company have?
There is no upper limit on the number of shareholders.

Q5: Can foreign nationals be directors or shareholders in a public company?
Yes, foreign nationals can be shareholders or directors, subject to FDI guidelines.

Q6: What are the main compliances for a listed public company?
Compliances include SEBI LODR Regulations, quarterly filings, annual disclosures, and shareholder communication.

Q7: Can a private company be converted into a public company?
Yes, by passing a special resolution and making necessary filings with the ROC.

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14. Difference Between Private and Public Company