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Overview:
On the basis of the Membership Pattern a company is classified
as Public, Private & Government. A Public Limited Company as
defined under sec 3 (1) (IV) of the companies act 1956 is one
which –
• Is not a private company
• Has a minimum paid-up capital of Rs. 5, 00,000/- or such
higher capital as may be prescribed.
• Is a Private Limited Company but a subsidiary of a public
limited company
By Virtue of sec 43 (A) certain private companies are deemed to
be public companies when –
• 25% or more of its paid up share capital is held by one or
more body Corporate
• Its average Annual turnover exceeds Rs. 25 Cr.
• It holds 25% or more of paid up capital of a public company or
,
• It accepts or renews deposits from public after making an
invitation by an advertisement.
Setup a Public Limited Company:
Every company comes into existence as per the provisions of the
Companies Act 1956. It is compulsory to register the name of the
company with the registrar of the companies and thereby receive
the Certificate of Incorporation. The Formation and
Incorporation of a company is a lengthy process. It involves
various steps which need to be taken as a legal entity
recognized by law. The setting up of a Public Limited Company
involves at least the following 4 stages namely
• Promotion Stage: - Decide the name of the company & submit an
application to the registrar for Incorporation.
• Incorporation Stage: - Preparing all the necessary documents
like the Memorandum & Articles of Association, Prospectus &
submit it to the Registrar.
• Capital Subscription Stage:- To make an advertisement inviting
the public to subscribe shares of worth mentioned in the
memorandum & articles and collect capital for the business.
• Commencement of Business Stage: - Obtaining the certificate of
Incorporation to start the business from the registrar after
complying with the requirements of incorporation as per the
companies act.
Advantages and Disadvantages Of Public Limited Company
• Unlimited Liability: - A public company can collect huge
amount of capital and has a better credit worthiness.
• Perpetual Succession: - Stability is important for a Public
Limited Company. It has its own legal status. It is more stable
and its existence does not depend upon the existence of its
owners.
• Efficient management: - A public company can afford to appoint
competent qualified staff and management authorities by offering
good salary. This ensures efficient management of the company’s
business.
• Democratic Management: - As all the members get chance to
express their views, opinions, demands on important issues, and
the management is democratic in nature.
• Research and Development:- Due to availability of huge finance
, the company can spare large funds for research and development
purpose.
• It gives a boost to service sectors thereby ensuring
upliftment and development.
• Relief in Taxation: - The rates of taxes are lower as compared
to the rate for individuals in higher income brackets.
• Government Control:- As per the provisions of the companies
act 1956 , even the court of law can intervene and investigate
if matters go wrong.
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