If you are looking to grow a business, the right business structure is necessary to attract investors, establish credibility and grow your business into larger markets. For entrepreneurs with large growth ambitions, going public or registering a public limited company is the ideal structure to build credibility, flexibility and raise capital. A public limited company can register and access a public market, access larger market visibility, and can facilitate long term scalability compared to a limited company or partnership. In this article, we will explain why you would want to register a public limited company, how public limited company registration in India works, and the main ways a public limited company will speed up your growth as a business.
What Is a Public Limited Company?
A public limited company (PLC) is a business that sells shares to the public, and has higher level of credibility with investors, financial institutions and regulators. In India, the PLC is defined under the Companies Act, 2013 and has a few minimum requirements: • 7 shareholders • 3 directors • ₹5 lakh paid-up share capital The most important bonus to becoming a PLC is the ability to raise capital through Initial Public Offerings (IPOs), or other public investments. This makes the PLC a very powerful vehicle for any business with an intention of growth.
Why Should You Register a Public Limited Company?
Setting up a public limited company can provide a number of benefits that make it one of the most popular types of businesses for entrepreneurs, particularly those looking to grow. Here are the main reasons why you need to be thinking of going public.
1.Unlimited Growth Potential
Unlike limited companies, public limited companies are not restricted to a small number of investors. By registering as a public company, there is no limit to the number of shareholders you can have. For most growth-focused entrepreneurs, going public will provide access to a significant amount of capital to enable them to expand, invest in R&D, acquire or diversify into new markets.
2. Increased Credibility and Brand Reputation
Registering a company as a public company will vastly improve the perception of your business in the market. PLCs are considered to be significantly more credible and more stable than other business types, according to investors, lenders, and even customers. This increased credibility will make it easier to develop partnerships or enter contracts with other businesses.
3. Easy Access to Funding
One of the main reasons for registering as a public limit company is access to easy capital by issuing shares or debentures. Public companies have easy access to capital through equity or debt. This easy funding access enables businesses to grow faster without the need for bank loans.
4. Limited Liability for Shareholders
The shareholders of a PLC, like those of a private limited company, are afforded limited liability. They are therefore protected from personal assets, and their liability is limited to the unpaid share amount.
5. Transferability of Shares
Shares in a public limited company are transferable. The liquidity of these shares attracts greater numbers of investors as a prospective investor is aware they may exit the company easily if they wish to sell their shares.
6. Attracting Talent
Public limited companies can offer stock options and employee ownership plans so that can hire and retain talented employees. This can be worth its weight in gold particularly in industries with an abundance of competition for top talent for driving business development and growth.
7. International Business Opportunities
Upon completing public company registration in India, you have given your business the flexibility to engage internationally. The credibility and structure of a PLC make it far easier to attract foreign investment and global contracts.
Process of Public Limited Company Registration in India
The process of public limited company registration in India is a straightforward process which has been designed with compliance and openness in mind. The process includes:
1. Obtaining Digital Signature Certificate (DSC): Required for all directors and shareholders to file electronically.
2. Obtaining Din (director identification number): Requirement for all proposed directors.
3. Approval of Name: The name approval process requires an application through the MCA portal (RUN" service).
4. Drafting of MOA & AOA: Memorandum of Association (MOA) and Articles of Association (AOA) define the objectives and governance of the newly formed Company.
5. Filing with MCA: Entire incorporation documentation plus MOA and AOA must be filed.
6. Pay Fees and Stamp Duty: As prescribed based on authorized capital and state guidelines.
7. Certificate of Incorporation: Issued by the Registrar of Companies (ROC), official confirmation of Company recognition.
8. Apply for PAN, TAN & Bank Account: mandatory to the taxation and funding/taxation of the Company.
Once incorporation has occurred the Company will also need to comply with some ongoing requirements, including: annual filings, board meetings, and disclosure standards.
Key Benefits of Public Limited Company Registration
Let's look more closely at why the registration of a public limited company is a smart move for ambitious companies:
1.More Access to Investors
While private companies need numbers of venture capitalists or private investors, a PLC can invite investment from the general public. This democratization of funding enables business growth to proceed on a larger scale.
2. Brand Recognition
Being a publically registered company gives your brand better visibility in the marketplace. Investors, partners and customers trust PLCs more.
3. More Talent
Top talent typically favours a PLC model, because it offers better career prospects, share option buying opportunities and generally more stability in the workforce. You're also attracting, hiring and keeping better talent!
4. Global Expansion
Many global markets and investors only work with publicly listed companies based on the governance and transparency that they provide. If global expansion is part of your business plan try to register as a PLC.
5. Tax Benefits
Public companies also have many tax benefits under Indian Law including deductions and exemptions based on industry and sector.
Importance of Public Limited Company Registration
1.Access to Capital
Becoming a public limited company enables you to raise money from the public by issuing shares. This is an awesome way to create cash to expand, invest in research and development, invest in marketing or expand to a new market.
2. Greater Credibility
Many groups have differing opinions on how credible public limited companies are over smaller business structures in India; for example, investors do have a preferential view of public limited companies over smaller business forms. Companies often gain the perception of greater transparency, accountability, and compliance with stringent regulatory regimes.
3. Separate Entity
A PLC has its own legal identity, which protects shareholders from personal liability. As a result, it can own property, enter contracts, and sue.
4. Talent Recruitment
Public companies frequently offer stock options and employee shareholding plans, which makes it easier to participate in attracting and retaining top talent.
5. Increased Brand Exposure
Public limited companies tend to have wider recognition and media exposure, allowing them to dramatically increase their market presence.
Advantages of Public Limited Company Over Other Structures
Feature
Proprietorship
Private Limited Company
Public Limited Company
Ownership
Single owner
Limited to 200 shareholders
Unlimited shareholders
Capital Raising
Limited
Restricted to private investors
Public funds via shares
Credibility
Low
Moderate
Very high
Governance
Informal
Moderate compliance
Strict compliance
Market Reach
Local/limited
Limited expansion
National & Global
From this comparison, it’s clear why entrepreneurs seeking rapid growth often choose public limited company registration.
Key Compliance Requirements for a Public Limited Company
After registration as a Public Limited Company, compliance should be maintained in all respects given that the following must occur:
• Statutory audit requirements must be met.
• Annual returns and financial statements must be filed with the ROC.
• Board meetings and general meetings must be held in accordance with the Companies Act.
• Proper books of accounts and registers should be kept.
Compliance is more onerous than that for Private Limited Companies. While it may seem overly complicated, compliance is set up with the intention of creating transparency and trust for investors and stakeholders.
Public Limited Company vs. Private Limited Company
Minimum Members
7 shareholders
2 shareholders
Can raise from public via IPOs
Cannot raise from public
Share Transferability
Free and unrestricted
Restricted
Market Visibility
High, publicly listed
Compliance
More stringent
Less stringent
For businesses with large-scale ambitions, public limited company registration in India offers a clear edge over private limited companies.
How Public Limited Company Registration Accelerates Growth
The decision to register a public limited company is more than just a legal step—it’s a growth catalyst. Here’s how:
1.Fund raising ability: a public limited company can access higher pools of capital.
2. Scalability: a PLC can scale with no limits; shareholders can raise as much money as they want.
3. Merger & Acquisition: A PLC has the power of structure which makes it easier to operate along with other companies.
4. Global stage opportunities: a PLC has the best chance of attracting foreign investors.
5. Sustainable growth: A transparent structure can help create a long-term sustainable business that trusts investors and stakeholders.
Tax Advantages of Registering a Public Limited Company
Taxation varies by business size and revenue, but being registered a public limited company does offer some tax-related advantages:
1. Corporate Tax Advantages - Public limited companies in India have access to many tax allowances and exemptions from the government;
2. Deductible Expenses - Expenses like wages, administrative expenses, and marketing expenses can be deductible, lowering taxable income;
3. Dividend Distribution Advantages - Yes there is dividend tax to a certain percentage, but tax efficiency can be done by smart structuring of finances for dividends.
4. Benefits of Going Global - When going international, the public limited company can take advantage of international treaties and incentives.
Common Mistakes to Avoid During Public Limited Company Registration
1.Inadequate Preparation for Compliance
Missing filings or meetings, and thinking that a lack of preparation is sufficient compliance can be a real issue for many of the companies going public. You may bring them under penalty. You do not want to be that company.
2. The Shareholders Agreement is Ignored
Many companies fail to draft any sharing agreement to support respectability and the eventual disagreements further down the line, and this is especially an issue with a range of public investors.
3. Improper Planning for Financial Strength and Requirements
Entering the public market, which can be fast, gives no time to unnecessarily draw up future public listing financials.
4. Ignoring Corporate Governance
For public companies, ethical and transparent are non-negotiates. Not being serious in preventing harm to your reputation and possible legal action (and bad third-party risk).
5. Underestimated Costs
The total cost to register a public limited company in India (including compliance and reporting) can add up. Companies which only consider registration costs are unlikely to budget wisely before registration.
Common Challenges in Public Limited Company Registration
While the benefits are powerful, businesses must also take into account the following drawbacks:
• Regulatory compliance: Public businesses are regulated under SEBI and ROC’s envious spotlight.
• Costs of compliance: Because statutory records must be maintained, are audited, and legal requirements had to be met, costs are higher.
• Loss of control: As you add shareholders, you would have to seek consensus from a larger group and you would lose some promoter control/decision-making ability.
Putting aside these drawbacks, the overarching power and advantages of registering a public limited company in India far exceed the disadvantages in most cases for entrepreneurs and businesses that are moving quickly towards large scale.
Is a Public Limited Company Right for Your Business?
Your decision to register a public limited company will ultimately depend on your business aspirations and objectives:
• If you’re looking to scale nationally or internationally, the public limited company structure will be more appropriate.
• If your business needs access to larger scale, funding is essential, and the public limited company structure is going to be your best bet.
• If your brand is looking for more visibility and trust, being a public company will add to your legitimacy.
If you are a startup or a small business that only requires minimal investment amounts, other structures like a private limited or a LLP company business structure may be worth looking at prior to registering a public limited company, but if you want to start to scale quickly, registering a public company will provide the best framework.
Conclusion
So, if your vision is scaling boundaries, gaining investor confidence, and building a business with a robust corporate identity, public limited company registration will be the smartest move you can make. The public limited company structure gives unparalleled credibility, access to public funding and growth both at a national level and global level as compared to other business structures, private businesses or smaller businesses. By successfully completing the registration of a public limited company in India, entrepreneurs can access business growth opportunities that are simply not accessible under other business models. Put in another way, if your vision is to create a business that stands out and stands tall in the marketplace, a Public Limited Company registration could become your greatest growth opportunity.
(FAQ)
1. What is the minimum requirement for public limited company registration in India?
You need a minimum of 7 shareholders, 3 directors, and ₹5 lakh paid-up capital to register a public limited company in India.
2. How long does it take to register a public limited company?
On average, it takes 10–15 working days, provided all documents are in order and there are no objections from the Registrar of Companies.
3. Can a private limited company be converted into a public limited company?
Yes, a private limited company can be converted into a public limited company by altering its Articles of Association and complying with ROC procedures.
4. What are the compliance requirements after registration of a public limited company?
A PLC must hold board meetings, annual general meetings, file annual returns with ROC, maintain statutory registers, and comply with SEBI regulations if listed.
5. Is public limited company registration suitable for small businesses?
Generally, PLC registration is more suitable for medium to large businesses with high capital requirements and growth ambitions. Small businesses may find private limited or LLP structures more cost-effective.
Your email address will not be published. Required fields are marked *