What is a Public Limited Company in India? Features & Examples
A public limited company is a business structure in which the company’s shares are offered to the general public, whereas the shareholders collectively own the company. Investors can freely buy, sell, and transfer these shares, either on a stock exchange or privately. As a result, it becomes one of the most effective ways for a business to raise large amounts of capital. In India, the Companies Act, 2013, governs public limited companies (listed or unlisted).
What sets it apart is the mix of public ownership and limited liability. Anyone can become a part-owner by holding its shares. However, a shareholder risks only the money they invest, so their personal assets stay protected even if the company faces losses or debt. A public limited company also exists as a separate legal entity, and it must have at least 7 shareholders and 3 directors. Moreover, after the Companies (Amendment) Act, 2015, removed earlier limits, a Public Ltd. Company no longer needs any minimum paid-up capital to start.
This guide covers its meaning, key features, advantages, disadvantages, and examples in India.
Key Takeaways
- A public limited company allows public shareholding and operates as a separate legal entity.
- Shareholders enjoy limited liability, protecting personal assets from business losses.
- It can raise large capital through public share issuance and stock market listing.
- Minimum requirements include 7 shareholders and 3 directors, with no minimum paid-up capital.
- It offers high transparency, strict compliance, and strong regulatory oversight under the Companies Act, 2013.
- Public limited companies provide liquidity, credibility, and long-term growth opportunities.
- They are suitable for large businesses seeking expansion and public investment.
What is a Public Limited Company? (Meaning & Definition)
As per Section 2(71) of India’s Companies Act, 2013, a public company is defined as a company which:
- is not a private company, and
- has a minimum paid-up share capital, if prescribed.
The Act also specifies that a subsidiary of a public company is also considered a public company, even if it remains a private company in its articles.
Prospectus and SEBI ICDR Regulations
When a public limited company offers shares to the public, it must issue a prospectus as per Section 26 of the Companies Act, 2013. The prospectus is a document that provides detailed information about the company and its business. Moreover, it includes the terms of the offer and the risks involved, helping potential investors make informed decisions.
Furthermore, when a public limited company intends to list its shares on a recognized stock exchange, the offer falls under the purview of the Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2018 (SEBI ICDR Regulations). These regulations stipulate additional requirements for disclosure, pricing, and allotment of shares in a public issue. Consequently, companies must adhere to these regulations to ensure transparency and protect investor interests.
Key Features of a Public Limited Company
The following are the key features of a public limited company:
- Separate Legal Entity: A public limited company has its own legal identity, separate from its shareholders and directors. As a result, it can enter into contracts, own assets, and sue or be sued in its own name.
- Limited Liability for Shareholders: Shareholders’ liability is limited to the value of their shares. Thus, their personal assets remain protected if the company faces financial or legal issues.
- Ability to Raise Capital from the Public: Public limited companies can raise funds by issuing shares to the public, allowing them to access a larger pool of investors compared to private companies.
- Transferability of Shares: Shares of a public limited company are freely transferable, meaning shareholders can buy, sell, or transfer their shares without restrictions. This provides liquidity to their investments.
- Perpetual Succession: The company’s existence is not affected by the death, insolvency, or retirement of its shareholders or directors. It continues to operate until legally dissolved.
- Minimum Shareholders and Directors: Per Section 3(1)(a) of the Companies Act, 2013, a public limited company must have at least 7 shareholders. It also requires a minimum of 3 directors and a maximum of 15, as per Section 149. More than 15 directors can be added by passing a special resolution.
- Professional Management: A board of directors, elected by the shareholders, manages a public limited company. This separation allows experienced professionals to run the business while shareholders focus on ownership.
- Public Disclosure and Transparency: Public limited companies must regularly disclose their financial statements, annual reports, and other material information to the public and regulatory authorities. This ensures transparency and accountability.
- Statutory Audit Requirement: As per Section 139 of the Companies Act, 2013, the financial statements of a public limited company must be audited by an independent external auditor.
- Stringent Regulatory Compliance: Public limited companies must comply with strict regulations, including the Companies Act, 2013, SEBI guidelines (for listed companies), and other applicable laws. This ensures proper governance and protects shareholder interests.
Types of Public Limited Companies: Listed vs Unlisted
Not all public limited companies are listed on stock exchanges; some remain unlisted too. Public limited companies can be classified into two main types based on whether their shares are traded on a recognized stock exchange:
| Characteristic | Listed Public Limited Company | Unlisted Public Limited Company |
| Share Trading | Shares are listed and traded on recognized stock exchanges like the BSE or the NSE | Shares are not traded on stock exchanges |
| Share Issuance | Shares are offered to the general public through an Initial Public Offering (IPO) | Shares are issued to a select group of investors through a private placement |
| Regulatory Compliance | Must comply with the Companies Act, 2013, SEBI regulations, and stock exchange rules | Subject to the Companies Act, 2013, only |
| Transparency | Required to regularly disclose financial statements (quarterly and annually), corporate actions, and material information to the stock exchange and the public | Comparatively less stringent disclosure requirements |
| Liquidity | Shares can be easily bought and sold on the stock exchange, providing liquidity to investors | Limited liquidity as shares are not traded on a stock exchange; transactions occur through private transfers or buybacks |
| Examples | Reliance Industries Limited, Tata Consultancy Services (TCS), Infosys Limited | Nayara Energy, Reliance Retail Limited |
In short, listed companies face stricter compliance requirements. However, they benefit from easier access to capital and greater market visibility. Unlisted companies, on the other hand, have more flexibility in their operations and are not subject to the daily scrutiny of the stock market.
How Does a Public Limited Company Operate?
A public limited company involves raising capital, managing the business, and ensuring accountability to shareholders. Here’s a step-by-step look at how a public limited company works:
1. Raising Capital Through Shares
The first step for a public limited company is to raise capital by issuing shares to the public. The company determines the number and type of shares to be issued, such as equity shares or preference shares, and sets a price for each share. Investors can then purchase these shares either through an Initial Public Offering (IPO) or on the stock exchange (for listed companies).
2. Shareholders Become Owners
When investors purchase shares, they become shareholders and partial owners of the company. The ownership level depends on the number of shares held by each shareholder. Shareholders have the right to vote on important matters, attend general meetings, and receive a portion of the company’s profits in the form of dividends.
3. Board of Directors Manages the Company
The shareholders elect a board of directors to oversee the management and strategic direction of the company. The board sets long-term goals and appoints key executives. It also ensures legal compliance and protects shareholder interests. As a fiduciary body, the board remains accountable to the shareholders.
4. Business Operations: Generate Revenue
Under the guidance of the board, the company’s management team carries out day-to-day business operations. This includes developing products or services, marketing, sales, and managing finances. The goal is to generate revenue and grow the business in line with the company’s strategic objectives.
5. Profits Are Distributed or Reinvested
As the company generates profits, the board of directors decides how to allocate those funds. A portion of the profits may be distributed to shareholders as dividends, while the remaining funds can be reinvested into the company for growth and expansion. The board must balance the interests of shareholders with the long-term needs of the company.
6. Shares Can Be Traded
One of the key features of a public limited company is that its shares can be freely traded on the stock exchange (for listed companies). This provides liquidity for shareholders, as they can buy or sell shares based on market conditions and their investment strategies. The share price fluctuates based on various factors, such as the company’s financial performance, market sentiment, and economic conditions.
7. Corporate Governance Ensures Accountability
To ensure transparency, accountability, and fairness, public limited companies must adhere to a robust corporate governance framework. This includes having board committees (such as audit, nomination, and remuneration, and stakeholders relationship committees) to oversee specific governance aspects, regularly disclosing financial statements and material information to shareholders and regulators, conducting independent audits, and protecting shareholder rights.
By following this process, public limited companies can raise capital, manage operations efficiently, and remain accountable to shareholders.
Requirements to Form a Public Limited Company in India
To incorporate a public limited company in India, the following requirements must be met:
- Minimum Number of Members and Directors: As per Section 3(1)(a) of the Companies Act, 2013, a public limited company must have a minimum of 7 members (shareholders) and at least 3 directors.
- DIN and DSC: Every director must obtain a Director Identification Number (DIN) and a Digital Signature Certificate (DSC) for electronic filing and compliance.
- Registered Office: The company must have a registered office address in India from the date of its incorporation.
- Capital Requirements: There is no minimum paid-up capital requirement, but the authorized share capital must be specified in the MOA.
- MOA and AOA: The Memorandum of Association (MOA) defines the company’s objectives, while the Articles of Association (AOA) lay down the rules for internal management.
- Obtaining Necessary Approvals and Licenses: Depending on the business activity, approvals may include GST, RBI, SEBI, FSSAI, IEC, or other sector-specific licenses.
By fulfilling these requirements and following the prescribed incorporation process, promoters can successfully form a public limited company in India.
Advantages and Disadvantages of a Public Limited Company in India
A public limited company supports large-scale growth through public funding. However, it also involves greater regulatory and operational responsibilities due to wider shareholder participation. Here’s a balanced comparison of its key advantages and disadvantages:
| Advantages | Disadvantages |
| Easier access to capital by issuing shares to the public | Increased compliance and regulatory requirements |
| Limited liability protection for shareholders | Higher costs associated with compliance and public disclosures |
| Enhanced credibility and reputation in the market | Pressure to maintain profitability and meet shareholder expectations |
| Liquidity for shareholders through stock exchange trading | Potential loss of control for original promoters |
| Ability to attract and retain talent with stock options and incentives | Risk of hostile takeovers |
| Perpetual existence, ensuring stability and continuity | Reduced flexibility in decision-making due to shareholder involvement |
Before deciding to go public, companies should carefully weigh these advantages and disadvantages against their long-term goals and business objectives. This helps ensure the decision aligns with their growth plans, financial capacity, and overall vision for the business.
Public Limited Company vs Private Limited Company
Public limited companies and private limited companies are two distinct types of corporate entities in India under the Companies Act, 2013, each with its own characteristics, advantages, and disadvantages. Here’s a detailed comparison of the two:
| Aspect | Public Limited Company | Private Limited Company |
| Ownership | Shares can be offered to the public and traded on stock exchanges such as the BSE and NSE | Shares are privately held and not offered to the public |
| Minimum Number of Members | Minimum of 7 members required | Minimum of 2 members required |
| Maximum Number of Members | No upper limit on the number of members | Maximum of 200 members (excluding present and past employees) |
| Minimum Number of Directors | Minimum of 3 directors required | Minimum of 2 directors required |
| Maximum Number of Directors | Up to 15 directors (can be increased via special resolution under Section 149) | Up to 15 directors (can be increased via special resolution) |
| Share Transfer | Shares are freely transferable | Share transfer is restricted and subject to the approval of the board of directors |
| Invitation to the Public for Subscription | Can invite the public to subscribe to its shares and debentures | Cannot invite the public to subscribe to its shares or debentures |
| Listing on Stock Exchanges | Can be listed on stock exchanges | Cannot be listed on stock exchanges |
| Disclosure and Reporting Requirements | High compliance burden, including quarterly results, annual reports, and SEBI filings for listed companies (e.g., Infosys, Reliance Industries, TCS) | Lower compliance requirements, such as annual financial statements and ROC filings (e.g., most startups and SMEs) |
| Annual General Meeting (AGM) | Must hold an AGM every year | Mandatory to hold AGM every year (only OPCs are exempt under certain conditions) |
Choose a public limited company if you want to raise large capital from the public, expand at scale, and plan for a stock exchange listing. Alternatively, go for a private limited company if you prefer simpler compliance, tighter control, and are building a startup or a closely held business.
Examples of Public Limited Companies
Public limited companies exist across industries where large-scale funding and public shareholding are essential. The examples below show major companies that operate under this structure in India and globally:
Indian Public Limited Companies
- Reliance Industries Limited (RIL): One of India’s largest conglomerates, operating in energy, petrochemicals, retail, telecommunications, and digital services. It lists its shares on the BSE and NSE.
- Tata Consultancy Services (TCS): A leading global IT services and consulting company. The company operates as a consulting firm, forms part of the Tata Group, and lists its shares on the BSE and NSE.
- Infosys Limited: A multinational technology company providing IT consulting and digital services. It lists its shares on the BSE, NSE, and NYSE.
- HDFC Bank Limited: One of India’s largest private-sector banks, offering a wide range of banking and financial services. It lists its shares on the BSE and NSE.
- ITC Limited: A diversified company with businesses in FMCG, hotels, packaging, agriculture, and IT. It lists its shares on the BSE and NSE.
Global Public Limited Corporations
- Apple Inc. (AAPL): A global technology company known for products such as the iPhone, Mac, and iPad. It lists its shares on the NASDAQ.
- Amazon.com, Inc. (AMZN): A leading e-commerce and cloud computing company. It lists its shares on the NASDAQ.
- Microsoft Corporation (MSFT): A multinational technology company specializing in software, cloud computing, and AI solutions. It lists its shares on the NASDAQ.
- Alphabet Inc. (GOOGL): The parent company of Google, operating in digital advertising, cloud computing, and AI. It lists its shares on the NASDAQ.
- Johnson & Johnson (JNJ): A multinational healthcare company focused on pharmaceuticals and medical technology. It lists its shares on the NYSE.
If you’re considering applying for public limited company registration in India, RegisterKaro can assist you with the process. Our experienced team can guide you through the incorporation, ensuring compliance with all legal requirements. Contact us today for seamless and efficient public limited company registration services.
