What is a Public Limited Company within the meaning of Companies Act ?

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Point out the major features and the number of members of Public Limited Company.

Section 3(1)(iv) provides the definition of Public company as follows:

  1. The company which is not a private company
  2. that has a minimum paid up capital of about 5 lakhs rupees or higher;
  3. a private company which is the subsidiary of the public company

A public company should contain not less than 7 members, registered under the Companies Act.  In a public company, shares or debentures are issued to the general public for the price quoted on a stock exchange.  As per Section 560 of Companies Act, 2000, every public company which has a paid up capital less than 5 lakh, incorporated before the Commencement of Companies Act, 2000 , required to enhance its paid capital to 5 lakh rupees within a period of two years from the commencement of the Act, otherwise, the company deemed to be defunct company

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A public company may be in three forms:

  1. Limited Company
  2. Unlimited company

I. Section 2(23) of the Companies Act, 1956 defines the limited company.  A limited company is the company limited by shares or guarantee.  Limited Company is further divided into two forms:

  1. Company limited by shares – Section 12 (2)(a) states that a company limited by shares is a registered company in which the liability of the members is limited by its Memorandum of Association, to the amount unpaid on the shares held by them. If the shares of any members are fully paid up, such members need not pay anything when the company made any call when it is a going concern or at the time of winding up of the company.
  2. Company limited by guarantee- A registered company in which liability of its members limited by its memorandum to the amount undertaken by the member to contribute to the assets of the company in the event of its winding up.  This liability of members arises only when the company has gone into liquidation and not when it is a going concern.

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II. Unlimited Company:  Section 12 (2) (c) of the Act, 1956 provided the definition for unlimited company.  It is a company in which the liability of its members has no limit i..e. the maximum liability may extend to even their assets to meet the obligations of the company in the event of winding up of such company.  The liability of members is only towards the company and in the event of being wound up, and it is stated that only liquidator can ask the members to contribute to the assets of the company to discharge the debts of the company.

As per Section 3 of the Companies Act, 2013 minimum number of members to form a public company is 7, for lawful purpose, may subscribe their names to its Memorandum of Association.

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The name of the public company must end with “Limited”

The company is a company is an independent legal person, its existence is not affected by change in the membership, or by the death of the members, or retirement or insolvency of any of its shareholders.  The company works based on the principle of perpetual succession.

The shares of the public company are freely transferable unless there is any express restriction

The shareholders of a public company have no right to participate in the day-to-day business affairs of the company. Board of Directors has the power to take policy decisions as well as business transactions and such decisions are taken by voting and majority rule.

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Adv. Anitha Gutti

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