Public Limited Companies

A public limited company allows businesses to raise capital by offering shares to the public while limiting shareholders' liability to their investment. In India, these companies operate under the Companies Act, 2013, and require a minimum of 7 shareholders and 3 directors.

Key points include:

• Shares may be offered through an Initial Public Offering (IPO) or traded on a recognised stock exchange if listed.
• A minimum paid-up capital of ₹5 lakh is required.
• Public limited companies must comply with strict disclosure and regulatory requirements.
• Investors can buy or sell listed company shares through the stock market using a Demat and trading account.
• Public limited companies may be listed or unlisted, depending on whether their shares trade on a stock exchange.

A public limited company (PLC) is a company that can raise capital by offering its shares to the public. Individuals who purchase these shares become shareholders and own a portion of the company based on the number of shares they hold.

The company has a separate legal identity from its owners. This means shareholders are generally liable only to the extent of their investment and are not personally responsible for the company's debts.

Companies can issue shares to the public through an Initial Public Offering (IPO). If listed on a stock exchange, these shares can later be bought and sold in the secondary market.

For example, if a business lists its shares on a stock exchange and investors purchase them, those investors become part owners of the company according to their shareholding.

In India, every public limited company operates under the Companies Act, 2013. A public limited company must have at least 7 shareholders, while there is no upper limit on the number of shareholders.

Some public limited companies choose to list their shares on a recognised stock exchange, while others remain unlisted. Companies offering shares to the public are subject to regulatory requirements, including periodic financial disclosures and approvals for future fundraising where applicable.

Shareholders of listed public limited companies can generally buy or sell their shares on stock exchanges through their stockbroking platform.

Public limited companies are broadly classified into two categories based on whether their shares are traded on a stock exchange.

Listed public companies

Listed public companies have their shares admitted for trading on recognised stock exchanges such as Bombay Stock Exchange (BSE) or the National Stock Exchange (NSE). Investors can freely buy and sell these shares in the market.

Some key characteristics include:

Listing provides greater liquidity because investors can enter or exit their investments through the stock market. It also increases the company's visibility and may improve its credibility due to additional disclosure requirements.

Unlisted public companies

Unlisted public companies are public companies whose shares are not traded on any stock exchange. Although they can have public shareholders, their shares are not available for regular exchange trading.

Reasons for remaining unlisted may include:

While unlisted public companies do not offer the same market liquidity as listed companies, they continue to operate as public limited companies and provide shareholders with limited liability.

Both listed and unlisted public limited companies have distinct advantages. Whether a company chooses to list its shares depends on factors such as its size, funding requirements, industry, and long-term business objectives.

Establishing a public limited company requires compliance with the provisions of the Companies Act, 2013. The registration process involves meeting eligibility requirements, appointing directors, preparing incorporation documents, and obtaining approvals from the relevant authorities.

The table below summarises the key requirements.

The registration process generally includes the following steps:

1. Ensure the company has at least 7 shareholders.
2. Appoint a minimum of 3 directors.
3. Arrange the minimum paid-up capital required for incorporation.
4. Obtain a Digital Signature Certificate (DSC) for one of the directors.
5. Apply for Director Identification Numbers (DINs) for all directors.
6. Reserve and register the company name in accordance with regulatory requirements.
7. Prepare the company's object clause describing its business objectives.
8. Submit the required incorporation documents.
9. Pay the prescribed registration fees.
10. Obtain the Business Commencement Certificate after approval, where applicable.

Several documents are required during the incorporation process. Preparing them in advance can help make the registration process more efficient.

Additional documents may also be requested by the Registrar of Companies (ROC) depending on the application.

Read more: CRAR ratio 

A public limited company offers several benefits that distinguish it from other forms of business organisation. These advantages mainly relate to ownership structure, access to capital, and operational continuity.

Limited liability protects shareholders from being personally responsible for the company's debts beyond their investment.

Public share issuance also enables companies to access a broader investor base, which can support business expansion and long-term funding requirements.

Listed companies additionally benefit from greater liquidity because shareholders can trade their holdings through recognised stock exchanges.

Professional management by a board of directors can help strengthen governance and decision-making across different business functions.

While public limited companies offer several advantages, they also face additional responsibilities and operational challenges.

Public companies are subject to regular financial reporting and corporate governance requirements. Meeting these obligations can increase administrative effort and operating costs.

Issuing additional shares allows companies to raise capital but may dilute the ownership of existing shareholders.

Unlike privately held businesses, listed public companies have limited control over market prices because share values fluctuate based on investor demand, company performance, and broader market conditions.

Companies that choose to go public also incur costs related to legal compliance, documentation, professional advisory services, and ongoing listing requirements.

In addition, public companies often face continuous scrutiny from shareholders, analysts, and the market, creating pressure to maintain consistent financial performance.

The following table highlights some of the key differences between public and private limited companies.

Although both structures provide limited liability, they differ significantly in ownership, fundraising options, governance requirements, and regulatory compliance. Public limited companies are designed for wider ownership and public fundraising, while private limited companies generally have fewer shareholders and cannot invite investments from the general public.

You can invest in a public limited company through either the primary market or the secondary market. Each route serves a different purpose and allows investors to participate at different stages of a company's fundraising journey.

Primary market

The primary market is where a company offers its securities to investors for the first time through an Initial Public Offering (IPO). Investors subscribe to the shares directly from the company during the issue period.

An already listed company may also raise additional capital through a follow-on public offer (FPO), allowing existing and new investors to subscribe to fresh shares.

Secondary market

The secondary market enables investors to buy and sell securities that have already been issued. Transactions take place between investors rather than directly with the company.

Besides equity shares, the secondary market also includes instruments such as debentures, bonds, options, commercial papers, and treasury bills.

The following are examples of public limited companies in India:

These examples are provided for educational purposes only.

The securities quoted are for example purposes only and not a recommendation.

Examples of public limited companies in India are:

• Indian Oil Corporation Limited
• Bharat Petroleum Corporation Limited
• State Bank of India
• Hindustan Petroleum Corporation Limited
• Oil and Natural Gas Corporation Limited

A Public Limited Company (PLC) is a business structure that can raise funds from the public by offering shares. It follows strict legal and regulatory requirements to ensure transparency and accountability.

• Separate legal identity: A PLC is treated as a separate legal entity from its owners, allowing it to own assets, enter contracts, and continue operations independently.
• Limited liability protection: Shareholders are only responsible for the amount invested in the company. Their personal assets are generally protected from company liabilities.
• Ability to raise public funds: A PLC can issue shares to the public through stock exchanges, making it easier to raise large amounts of capital for expansion.
• Perpetual succession: The company continues to exist even if shareholders or directors change, ensuring long-term business continuity.
• Transferability of shares: Shares of a public company can usually be transferred freely, giving investors flexibility to buy or sell their holdings.
• Strict compliance requirements: PLCs must follow various legal regulations, financial disclosures, and reporting standards set by regulatory authorities.
• Minimum number of members and directors: A Public Limited Company must have at least seven shareholders and three directors to operate legally.

Registering a public limited company involves completing several statutory formalities before commencing business operations.

The process can be summarised as follows:

Following these steps helps complete the legal incorporation process in accordance with the applicable regulatory requirements.

A public limited company is a business structure that allows companies to raise capital by offering shares to the public while providing shareholders with limited liability. In India, these companies operate under the Companies Act, 2013, and must satisfy prescribed requirements relating to shareholders, directors, incorporation, and regulatory compliance.

Understanding how public limited companies function, their advantages, limitations, registration requirements, and methods of investment can help you make informed financial and investment decisions. Before investing in any public limited company, ensure that you analyse its name, fundamentals, and market capitalisation.