Public limited company: steps to incorporate in your jurisdiction

A public limited company is a widely recognized business structure that allows for extensive capital raising through public offerings of shares. This corporate entity offers numerous advantages and opportunities but also comes with specific characteristics and compliance requirements. In this comprehensive guide, we will delve into the key characteristics of a public limited company, the necessary compliances it must adhere to, and the steps involved in its formation. Whether you're an entrepreneur looking to establish a public limited

Public limited company generally

Definition

A public limited company (PLC) is a type of public company in the United Kingdom, analogous to a publicly traded company in the United States that uses the designation "Inc." or "corporation."

How Public Limited Company (PLC) works

A PLC refers to a company that has made its shares available to the public for purchase. Individuals who buy these shares are protected by limited liability, ensuring that they are not liable for business losses exceeding the value they invested in acquiring the shares.

In the United Kingdom, a PLC operates in a manner akin to that of a publicly traded corporation in the United States. It is subject to regulatory oversight and is obligated to release regular reports to both existing shareholders and potential investors regarding its actual financial condition.

Characteristics of public limited company

A Public Limited Company is an entity that has limited liability and provides shares for purchase by the general public. Additionally, the shares of a Public Limited Company can be obtained by individuals through an IPO or through trading activities. In this article, we will explore the primary attributes of a Public Limited Company. Here therefore are some of its principal attributes:

1. Distinct Legal Entity:

   A Public Company is recognized as a legal entity separate from its shareholders or members.

2. Ease of Share Transfer:

   Shareholders of a public limited company can effortlessly transfer their shares to the public without any restrictions, inviting public subscriptions for shares.

3. Perpetual Existence:

   The company enjoys perpetual existence, unaffected by changes in its members, directors, or shareholders. It continues to exist unless it is formally closed or liquidated, even in the event of the demise or incapacity of individuals associated with it.

4. Limited Liability:

   Shareholders and directors have limited liability, meaning they are only liable to the extent of their share ownership. They are not personally responsible for the company's losses or debts.

5. Paid-Up Capital:

   Under the Companies Act, 2013, a public company must have a minimum paid-up capital of Rs 5,00,000 to commence its operations.

6. Name:

   Public companies have the suffix "LTD" added to the end of their names.

7. Directors:

   Public companies must have a minimum of three directors, with no maximum limit. They are required to possess a Director Identification Number (DIN) issued by the Ministry of Corporate Affairs (MCA).

8. Prospectus:

   Public limited companies can issue a prospectus to invite the public to subscribe to their shares. A prospectus provides detailed information about the company and the number of shares offered in an IPO or subsequent listing.

9. Borrowing Capacity:

   Public companies have the advantage of borrowing from various sources. They can issue debentures (secured or unsecured), shares (equity or preference) to the public, and obtain loans or financial aid from banks and other financial institutions.

10. Number of Members:

    The minimum requirement for members in a public company is seven, with no maximum limit.

11. Board of Directors:

    A minimum of three directors is required, with a maximum limit of twelve. Directors are elected by shareholders during the Annual General Meeting.

12. Voluntary Association:

    It is easy to buy and exit shares in a public company, providing flexibility for investors.

13. Minimum Subscription:

    Public companies must receive a minimum of 90 percent of the subscribed shares' value. Failure to meet this requirement may result in the inability to continue business operations.

14. Minimum Subscribers:

    A minimum of seven subscribers is required for the Memorandum of Association of a Public Company, and these individuals become members of the company.

15. Certificate of Commencement:

    Unlike private companies, public companies must obtain a Certificate of Commencement before commencing business operations. This is in addition to the Certificate of Incorporation.

16. Memorandum of Association:

    The Memorandum of Association (MOA) is a crucial document for public companies. Unlike private companies, public companies require both the MOA and Articles of Association to begin operations. The MOA outlines the company's primary objectives and businesses it intends to undertake.

These fundamental characteristics define a public limited company and shape its structure and operations.

Characteristics of public limited company

7 Advantages to compliances for public limited company

The vital to comply to Annual Compliance Requirements

• Running a company, whether it falls under the category of a Public Company or a Private Company, is a complex task. Frequently, individuals contemplating the establishment of a company are unaware of the crucial compliance obligations that must be fulfilled. Failure to meet these obligations can result in substantial fines and penalties for the company. In addition to financial consequences, both the company and its directors may be subjected to audits and investigations.
• Therefore, it is essential to emphasize that a Public company is obligated to commence its annual compliance procedures right from the moment of its incorporation. Non-compliance can create numerous obstacles for the company, including financial penalties. To avoid such situations, it is imperative to possess awareness of and adhere to the relevant compliance requirements. For a Public Company, accurately disclosing its financial status to shareholders and investors is a mandatory obligation.

Compliances for public limited company

The Benefits of Annual Compliance for Public Limited Companies

1. Fosters Transparency and Establishes Credibility:

Adhering to annual compliance requirements, as mandated by company law, is a fundamental responsibility for all companies. Consistent compliance efforts contribute to the company's credibility by ensuring transparency in its operations.

2. Boosts Public Confidence:

Effective annual compliance practices enhance the confidence of both the public and clients, as they perceive that the company regularly evaluates its operations.

3. Provides a Competitive Advantage in the Market:

A competitive advantage in the market is provided by annual compliance. Companies can use it as a marketing strategy, assuring investors and customers of diligent business conduct.

4. Attracts Investment Opportunities:

Companies require investment for smooth operations, and investors tend to favor companies that demonstrate strong compliance practices and offer the potential for high returns. Before committing to an investment, investors scrutinize a company's financial records and status, emphasizing the importance of compliance for credibility.

5. Maintains Active Status:

Timely and proper compliance efforts help maintain the active status of the company, ensuring its continued operations.

6. Ensures Accurate Data Collection:

Annual compliance by Public Companies assures the public that data collected for compliance purposes is accurate and truthful.

7. Prevents Costly Penalties:

Non-compliance often results in significant fines and penalties. Adequate annual compliance measures help avoid these financial burdens.

4 Stages of formation of public limited liability company

Forming a public limited company involves several steps and legal procedures. The process may vary depending on the jurisdiction, but the core elements remain consistent. Here is an overview of the steps involved in the formation of a public limited company:

Promotion Stage

The promotion phase marks the initial stage of company establishment. It encompasses all the activities necessary to initiate a business venture, forming the basis upon which a business can operate. The essential steps in this phase of company formation include:

1. Identification of Business Opportunity.
2. Thorough Investigations.
3. Gathering Various Components.
4. Preparation of Essential Documents.

These activities culminate in the establishment of a tangible business structure. However, at this juncture, a business cannot commence operations. Legal status is a prerequisite, achievable only through registration, a process commonly referred to as Incorporation.

Incorporation Stage

Incorporation constitutes the second phase in the creation of a public company, involving the formal registration of the company. Supporters or founders must compile the necessary documentation and submit it to the registrar for the official incorporation of the company. These essential documents include:

1. The Memorandum of Association, signed by no fewer than seven company members.
2. The Articles of Association, also signed by no fewer than seven company members.
3. Submission of the required prospectus or a statement, often referred to as an "in lieu of prospectus," to the registrar.
4. Comprehensive details of directors, including their willingness to fulfill their roles in the business, with their respective signatures.
5. Notification of the registered office address of the company.
6. Payment of the prescribed filing fee and the duty on share capital, supported by original challan receipts.
7. A declaration confirming compliance with the Companies Ordinance provisions, approved by one of the authorities, typically a company secretary.
8. Certificates of appointment for nominated directors.

Upon submission of these documents and the requisite filing fee, the registrar will meticulously review the entire documentation. After ensuring compliance with legal requirements, if all conditions are met satisfactorily, the registrar will officially register the company in accordance with the Companies Ordinance. Subsequently, a certificate, known as the "Certificate of Incorporation," is issued.

This certificate serves as a crucial piece of evidence demonstrating compliance with the requirements outlined in the Companies Ordinance. However, it does not grant permission to commence business operations at this stage.

Subscription Stage

For a Private Limited Company, business activities may commence upon receipt of the Certificate of Incorporation. In contrast, a public limited company must fulfill an additional prerequisite to initiate operations: obtaining a "Certificate of Commencement of Business." This phase of company formation involves the following key steps:

1. Issuing an invitation to the general public to subscribe to shares through the issuance of a prospectus.
2. Submission of a statement, which may serve as a substitute for a prospectus, to the registrar if no prospectus has been issued.

Commencement Stage

The commencement stage of a public limited company entails the submission of the following documents:

1. A declaration confirming that the entire amount payable on shares allotted in cash has been paid.
2. A declaration indicating that each director has made a cash payment covering the full amount of shares owed.
3. A declaration stating that no repayment is expected to be made to applicants, specifically for shares already offered for public subscription.
4. A statutory declaration, signed by the secretary, affirming that all requirements and conditions have been met.

Upon satisfaction that all these declarations have been duly verified and submitted, and if all other statutory requirements of the Companies Ordinance have been fulfilled, the registrar will issue a The phrase "Certificate of Commencement of Business." A corporation is permitted to start conducting business after it has this certificate.

Conclusion

In conclusion, establishing and operating a public limited company offers unique opportunities for capital raising and expansion, but it also comes with specific characteristics and compliance requirements. Understanding these characteristics, adhering to compliances, and following the proper formation process are essential for the successful operation of a public limited company. Whether you're an entrepreneur embarking on this journey or an investor considering PLC investments, comprehensive knowledge of these aspects is crucial for your success in the business world.