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Definition and Characteristics of Public Limited Company

Definition and Characteristics of Public Limited Company

Definition and Characteristics of Public Limited Company

In this Post, we are going to tell u about Definition and Characteristics of Public Limited Company. A limited company grants limited liability to its owners and management. Being a public company allows a firm to sell shares to investors this is beneficial in raising capital. A minimum of three Directors are required for establishing a Public Limited Company and it has more stringent regulatory requirements compared to a Private Limited Company.

Public Limited Companies are those types of companies where minimum number of members is Seven and minimum number of Directors is Three and there is no cap on the maximum number of members. A public limited company has most of the characteristics of a private limited company. A public limited company has all the advantages of private limited company and the ability to have any number of members, ease in transfer of shareholding and more transparency. Identifying marks of a public limited company are name, number of members, shares, formation, management, directors and meetings, etc.,

Characteristics of Public Limited Company:

1. Members– To start a company, a minimum number of 7 members are required and no restrictions on maximum number of members as per the provisions of the Companies Act, 2013.

2. Limited Liability– The liability of each member or shareholders is limited. It means that if a company faces loss under any circumstances then its shareholders are liable to sell their own assets for payment. The personal, individual assets of the shareholders are not at risk.

3. Perpetual succession– The company keeps on existing in the eyes of law even in the case of death, insolvency, the bankruptcy of any of its members. This leads to perpetual succession of the company. The life of the company keeps on existing forever.

4. Index of members–  A public company is required to maintain an index of its members whereas private company has a privilege over the public company as they don’t have to keep an index of its members.

5. A number of directors– When it comes to directors a public company needs to have only three directors. With the existence of 3 directors, a public company can come into operations.

6. 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.

7. Prospectus– Prospectus is a detailed statement of the company affairs which is issued by a company for its public. Thus, in the case of Public limited company, there is a need to issue a prospectus.  However,  in case of Private limited Companies, public is not invited to subscribe for the shares of the company.

8. Minimum subscription– It is the amount receive by the company which is 90% of the shares issued within a certain period of time. If the company is not able to receive 90% of the amount then they cannot commence further business. In case of private limited company shares can be allotted to the public without receiving the minimum subscription.

9. Name– It is mandatory for all the Public companies to use the word  limited after its name.

Here are some Advantages and Disadvantages of Public Limited Company.

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Definition and Characteristics of Public Limited Company

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