Public Company Registration
Starting a new venture or expanding an existing one is never an easy feat, especially when it comes to registering your company in India. With a range of legal formalities to be fulfilled and paperwork to be submitted, the process of registering a public company in India can seem overwhelming. But fear not! In this blog post, we will guide you through the entire process step-by-step, outlining the various requirements, documents, and procedures involved in public company registration in India. Whether you’re a first-time entrepreneur starting out on your own, or an experienced business owner looking to take your enterprise to the next level, this post is a comprehensive guide that you simply can’t miss!
1. Overview of Public Limited Companies in India
Public Companies (PLCs) are regulated by the Companies Act 2013 and are required to publish their financial health to shareholders. PLCs offer shares to the public and allow anyone to invest through an IPO or stock trades. A minimum of three directors is required to establish a PLC in India with no limit on the maximum number of directors. Shareholders’ liabilities are limited to the amount invested, protecting them from company losses but not illegal actions. A minimum of Rs 5 lakh paid-up capital is required, with a prospectus compulsory for issuing shares. A PLC must add “limited” to its name and can issue shares to the general public. Being listed on the stock market can aid growth and business expansion. Seven shareholders, three directors, Rs 1 lakh authorized share capital, and proper documents with fees are needed for registration.
Steps to Register a Public Limited Company in India
To register a public limited company in India, there are several legal requirements to be fulfilled. Firstly, a minimum of seven shareholders are required to form the company. The company must have a minimum authorised share capital of Rs. 1 lakh, and at least three directors should be appointed. One director must possess a digital signature certificate (DSC) for filing the forms on the MCA portal. The Company name should be as per the provision of the Company Act and Rules, and a prior name approval application should be filed with the Ministry of Corporate Affairs. After obtaining the name approval, the Memorandum of Association (MoA) and Articles of Association (AoA) should be executed. The MoA and AoA, along with other necessary documents, must be submitted to the ROC for verification. Once the registration process is complete, the ROC issues the incorporation certificate along with the CIN of the Company. Finally, it is compulsory to add the word ‘limited’ after the company name, as per the Companies Act 2013.
Compliance requirements for public limited companies in India
Public limited companies in India are regulated by the Companies Act 2013 and are required to comply with various compliances, including those related to taxation and labor laws. Apart from complying with the Companies Act 2013, public limited companies need to take care of certain mandatory compliances. These include disclosing interest received from directors, filing a notice of disqualification of directors, getting the first statutory auditors appointed at the board meeting within 30 days of incorporation, and allotting shares to the subscribers of the memorandum of association within two months from the date of incorporation. It is also mandatory to file a declaration for the commencement of business within 180 days of incorporation. Additionally, a minimum of four board meetings should be held in a year, and the first AGM should be held within nine months of the financial year’s closure.
2. Requirements for Registration of a Public Limited Company
To establish a public limited company in India, there are certain requirements that need to be fulfilled. Firstly, a minimum of 7 shareholders and 3 directors are needed. Secondly, a minimum authorized share capital of Rs. 1 lakh is mandatory. Additionally, digital signature certificates of one of the directors and self-attested copies of their identity and address proof are required. Directors will also need to obtain a Director Identification Number (DIN). It is important to ensure that the company name meets the provisions of the Companies Act and Rules. Further, the Form DIR-12 needs to be submitted along with the necessary documents. Lastly, the prescribed registration fees need to be paid to the Registrar of Companies (ROC). Registering a public limited company grants businesses access to raise equity capital through the trading of its shares. By fulfilling the aforementioned requirements, businesses can establish themselves as PLCs and invite the general public to invest in their company through an IPO or trades on the stock market.
3. Procedure for Registration of a Public Limited Company
To a Public Limited Company in India, one needs to follow a detailed procedure.
Firstly, one needs to fulfill all legal requirements, such as having a minimum of seven members, an appropriate number of directors, and a minimum paid-up share capital.
Subsequently, one needs to obtain Digital Signature Certificates (DSC) and Director Identification Number (DIN) for the company’s directors.
Additionally, it’s necessary to have a registered office with a proper address. After that, one needs to file an application with the Registrar of Companies (ROC) to approve the company’s name.
Once the name gets approval, the company needs to execute crucial documents such as Memorandum of Association (MoA) and Articles of Association (AoA).
The ROC will verify these documents, and once cleared, the company will receive the incorporation certificate and Corporate Identification Number (CIN).
After receiving the certificate, the company can begin its operations, but obtaining additional licenses and permits may be required.
4. Obtaining Digital Signature Certificate (DSC) for Registration
To ensure the security and authenticity of electronic documents filed under the MCA21 e-Governance program, the Ministry of Corporate Affairs in India has made it mandatory to use Digital Signatures (DSC). Both companies and limited liability partnerships (LLPs), as well as professionals such as Chartered Accountants and Company Secretaries, are required to obtain a DSC.
A DSC is a secure digital key that contains information about the person holding it, such as name, email address, country, pin code, and the name of the certifying authority. It is issued by a Certifying Authority appointed by the Ministry and comes with one or two-year validity, after which it must be renewed.
To apply for a DSC, the applicant needs to provide certain documents which depend on the Certifying Authority. The applicant can either go to the Certifying Authority in person with the originals or apply online. The Ministry of Company Affairs has recognized a few entities as licensed DSC Certifying Authorities including those who are appointed by the Controller of Certification Agencies under the Information Technology Act 2000. It is illegal to use a DSC issued to someone else.
The cost of a DSC varies depending on the Certifying Authority’s issuance cost, including a one-time cost of a USB token (provided by the user), and the renewal cost after the period of validity. The Ministry has obtained the costs from the Certification Authorities for guidance of stakeholders. For instance, USB crypto tokens can be procured from www.mtnltrustline.com at a price of Rs. 300/- (for MTNL phone subscribers) and Rs. 450/- for others, excluding taxes.
To register for a DSC, the applicant can use the official website of Online Legal India or visit the selected Certifying Authority with original or online documents. The Ministry of Corporate Affairs has stipulated a Class-II or above category signing certificate for e-filings under MCA21. Once the DSC is expired, the applicant needs to renew it. The process of renewal is the same as that of registration on the Ministry of Company Affairs portal.
Digital Signature Certificate is mandatory for Public Company Registration in India, and applicants must follow the guidelines set by the Ministry. By complying with the filings of the MCA21 e-Governance program, businesses can ensure the security and authenticity of their electronic documents. While obtaining a DSC can be a process, online assistance from domain experts is available to guide applicants through the process and help them with their business needs.
5. Obtaining Director Identification Number (DIN)
To become a director of a company in India, an individual must obtain a Director Identification Number (DIN) from the Ministry of Corporate Affairs. A DIN is an 8-digit unique identification number with lifetime validity that is specific to the individual and not the company. This means that even if a director resigns from one company and joins another, he or she can use the same DIN. New companies should use the SPICe form to apply for DINs for first directors, while existing directors must use eForm DIR-3. The application must be filed electronically, and supporting documents, such as proof of identity and address, must be attached. After verification and electronic payment of the application fee, the central government will either approve or reject the application within one month. Upon approval, the DIN will be communicated to the applicant, and the director must inform all companies where they hold a position within one month.
6. Importance of Proper Registered Office Address
Public Company Registration in India is a legal process where a company becomes a separate legal entity from its owners. The Indian government mandates that all businesses have a registered office address. This address can be used to communicate with the government and other stakeholders. A proper registered office address is essential for a company to conduct its operations efficiently and effectively.
The registered office address serves many purposes. It is the place where all official documents and legal notices will be sent. It acts as the company’s official address for communication with the government. It’s also the address where the shareholders can send their correspondence. The registered office address also features prominently on the company’s website and business cards.
Having a proper registered office address adds to the credibility of the company. It shows that the company is in compliance with the Indian government’s regulations and has a physical presence in the country. This ensures that the company’s stakeholders trust the company and its actions.
The registered office address must be in the same state where the company is registered. It’s important that the company’s registered office address is constantly updated with the Registrar of Companies. The company’s stakeholders should also be informed of any changes made to the registered office address.
A company may choose to use a virtual office as its registered office address. However, it’s necessary to ensure that all legal requirements for registered office addresses are met, such as having an actual physical presence in that location.
In conclusion, a proper registered office address is crucial for the efficient functioning of a public company in India. It provides a unique identity to the company and ensures that it is in compliance with the government’s regulations. It also adds to the company’s credibility and trustworthiness among its stakeholders.
7. Getting Approval for Company Name with ROC
When it comes to registering a company in India, obtaining approval for the company name is essential. The Registrar of Companies (ROC) under the Ministry of Corporate Affairs (MCA) regulates the company name approval process. To get approval for a company name, the applicant needs to visit the MCA’s portal and submit a web-based form via the Reserve Unique Name (RUN) service. It is essential to exclude words like Private Limited or Limited at the end of the name. The name must end with terms like a forum, foundation, association, etc., as prescribed for section 8 companies.
The RUN service has simplified the company name approval process and requires no specialized skills for application filing. Any individual with average computing skills can register a company name without hassle. Registered users can leverage the RUN service on the MCA portal, and one name can be submitted under a RUN application. For name modification or reservation, the proposed name must conform to the Companies Act 2013 and Section 4(2) guidelines. It is advisable to submit the object of the proposed firm to support the proposed name. The approval received from the RUN service remains valid for a specified period.
8. Execution of Memorandum and Articles of Association
When registering a public company in India, the Memorandum and Articles of Association play a crucial role. The Memorandum defines the company’s primary existence and objectives, while the Articles outline the internal regulations and management of the company. Once the documents are drafted, they must be executed as per the Companies Act, 2013, and the previous Act, if any. The execution requires the signature of the subscribers to the Memorandum and two witnesses, along with relevant fees and relevant documentation. The execution process must be completed within 60 days of submitting the application for company registration. The Memorandum and Articles of Association must be in compliance with all applicable laws and regulations. They must be filed with the Registrar of Companies and made available to every shareholder, lender, and creditor of the company. A company’s Memorandum and Articles of Association are critical documents that define and govern its operations, and they must be carefully drafted and executed in compliance with legal requirements.
9. Issuance of Incorpornatio Certificate and Starting Business Activities
After the necessary steps for public limited company registration, the next crucial step is the issuance of the incorporation certificate. This certificate is issued by the Registrar of Companies (ROC) and serves as proof of the company’s legal existence. Along with the certificate of incorporation, the ROC also issues the Corporate Identity Number (CIN) of the company. The business activities cannot commence immediately after receiving the certificate, and the company must apply for different certificates and licenses before starting operations.
Apart from obtaining necessary permits and licenses, public limited companies need to meet multiple regulations set by the Indian government. These companies can raise capital from the general public by listing their shares in the stock exchange. The strict rules and regulations governing public limited companies set them apart from private limited companies. However, public limited companies offer the benefits of a corporate entity with limited liability and easy transferability of ownership and shares. Moreover, public limited companies are ideal for entrepreneurs planning for large-scale business operations.
To obtain public limited company registration, entrepreneurs must ensure all the legal requirements are meeting before proceeding with the registration process. The company must have a proper registered office address, and a minimum of seven members is required to start a public limited company. The next steps involve obtaining Director Identification Number (DIN) and Digital Signature Certificates (DSC) for the directors, name approval, and execution of crucial documents such as Memorandum of Association (MoA) and Articles of Association (AoA). Once the ROC verifies the documents, the company receives the incorporation certificate, and then they can start applying for necessary certificates and licenses before commencing operations.
10. Advantages of Public Company Registration in India
Public Limited Companies (PLCs) in India offer a plethora of benefits to entrepreneurs planning large-scale business operations.
Registering a Public Limited Company provides all the advantages of a corporate entity, including limited liability and easy transferability of shares.
A minimum of seven shareholders are required to start a Public Limited Company, with no maximum limit on members. This type of company gets listed on the stock exchange and can raise capital from the general public.
Although regulations of the government are strict for a Public Limited Company, it is still advisable to incorporate one as it provides features of a Private Limited Company. Public Limited Company registration includes obtaining 8 DSC, 3 DIN, and 1 RUN for Name Approval, MOA, AOA, incorporation certificate, PAN, TAN, GST registration, and opening a business bank account.
Incorporating a Public Limited Company ensures that company shares are transferable through the stock trade and can provide access to a wider capital base. Additionally, partnerships and sole proprietorships’ debts jeopardize owners and partners, but shareholders of a Public Limited Company are not personally responsible for any debt or losses beyond what they invested.
11. Disadvantages of Public Company Registration in India
Public company registration in India has its own set of advantages and disadvantages. In this blog, we’ll focus on the disadvantages of public company registration in India.
One of the main drawbacks of public limited companies is the stricter legal and regulatory compliances. These regulations lead to reduced operational flexibility. For instance, a public limited company requires at least 7 shareholders to set up, whereas a private limited company can be established with just 2 shareholders.
Additionally, a public limited company must have a minimum paid-up capital of Rs. 5 lakhs, whereas no such limit is prescribed for a private limited company. Furthermore, a public limited company must adhere to greater transparency standards, forcing it to have its accounts audited more frequently than a private limited company.
All of these factors contribute to the reduced flexibility of public limited companies and may prove to be a disadvantage for companies seeking a more agile structure.
12. Documents required for Public Company Registration in India
Entrepreneurs planning to register a public company in India must submit various documents for the process.
According to Meerad Expert, Indian nationals must provide a copy of their PAN card and address proof, and foreign nationals must present a notarized or apostilled copy of their passport, along with a notarized or apostilled address proof.
The address proof must contain the Director’s name, match the name on their PAN card or passport, and be no older than two months for Indian nationals and one year for foreign nationals.
Residential proof, containing the Director’s name and not older than two months or one year, must also be submitted for validation of the current address.
Proof of registered office, such as an electricity bill or rental agreement, must also be provided. The process for public company registration in India includes several steps, including obtaining a Commencement of Business Certificate after incorporation.
13. Frequently Asked Questions about Public Company Registration in India
Public Company Registration in India FAQs
Want to register a public limited company in India? Here are some frequently asked questions regarding public company registration:
What are the primary requirements for setting up a public limited company in India?
To set up a public limited company, you need a minimum of seven shareholders and three directors. The directors can also be shareholders. Additionally, there is no minimum paid-up share capital required by law.
What are the advantages of registering a company as a public limited company instead of a private limited company?
A public limited company has more compliance burden but also enjoys a wider range of features and facilities that a private limited company does not. These include no limit to the maximum number of shareholders, legally authorized trade on stock exchanges, raising funds from public and accepting public deposits, and much more.
What is the most authentic process of registration of a public limited company in India?
There are two authentic options for registering a public limited company in India: filing the Integrated Incorporation Form INC-29 with the MCA or applying for approval and reservation of a proposed name through Form INC-1 sent to the Central Registration Centre.
Can an NRI/Foreign National be a director in a public limited company? What are the conditions for the same?
Yes, an NRI or Foreign National can be a director or shareholder in a public limited company of India. To become a director, the person must possess the DIN issued by MCA and fulfill other basic requirements.
What are the liabilities of a public limited company?
Since a public limited company deals with public money, it has to make rather heavy compliances strictly, including regular compliances related to income tax and periodic or annual compliances for ROC/MCA SEBI RBI, among others. These liabilities are in addition to securing and promoting steadily the profits and welfare of all shareholders of the public limited company.
How can one avoid rejection of registration of the company name in India?
To avoid rejection of company name registration, the name must align with the principal objects of the company as set out in its Memorandum of Association, among other factors. Stamp Duty is payable under Section 3 of the Indian Stamp Act 1899, at the time of the registration.