Introduction
A Public Company, as defined under the Companies Act, 2013, is a corporate entity that plays a vital role in India’s economic framework. It is a company that permits public ownership and enables fund mobilization through the issuance of shares, debentures, or deposits. Distinguished by its transparent structure and open membership, a public company is pivotal for fostering investor confidence and economic growth.
What is a Public Company?
According to Section 2(71) of the Companies Act, 2013, a public company is one that:
- Is not a private company.
- Has no restrictions on the transfer of its shares. Further, a private company that is a subsidiary of a public company is also deemed a public company.
Key Characteristics of a Public Company
1-Minimum Requirements:
- Minimum 3 Directors.
- Minimum 7 Members(Shareholders).
2-No Restriction on Share Transfer:
Shares of a public company can be freely transferred unless expressly restricted by law.
3-Name and Identity:
The name of a public company must end with “Limited,” indicating its corporate structure.
4-Raising Funds from the Public:
Public companies can issue shares or debentures to the public through Initial Public Offerings (IPOs) or private placements.
5-Liability of Members:
The liability of shareholders is limited to the unpaid amount on the shares they hold.
Compliance Requirements under Companies Act, 2013
Public companies must comply with strict statutory provisions, ensuring accountability and transparency:
Mandatory Filing:
Financial statements and annual returns must be filed with the Registrar of Companies (ROC).
Independent Directors:
Section 149 mandates that certain public companies appoint at least 2 independent directors.
The following class or classes of companies shall have at least two directors as independent directors
- the Public Companies having paid up share capital of ten crore rupees or more; or
- the Public Companies having turnover of one hundred crore rupees or more; or
- the Public Companies which have, in aggregate, outstanding loans, debentures and deposits, exceeding fifty crore rupees:
Board Meetings:
As per Section 173, a public company must conduct at least four board meetings every year.
Audit Requirements:
Public companies are subject to statutory audits, and listed Public companies must also undergo secretarial audits (Section 204).
Corporate Governance:
Listed public companies must comply with SEBI regulations, emphasizing ethical practices and transparency.
Compliance Requirements under Companies Act, 2013
Public companies must adhere to specific filing deadlines as mandated by the Companies Act, 2013, and related regulations.
Compliance/Form | Description | Due Date | Applicable Regulation |
AOC-4 | Filing of audited financial statements with ROC | Within 30 days of AGM | Section 137 of the Companies Act, 2013 |
MGT-7 | Filing of annual return | Within 60 days of AGM | Section 92 of the Companies Act, 2013 |
DIR-3 KYC | KYC of Directors through their DIN | By 30th September annually | Rule 12A of Companies (Appointment & Qualification of Directors) Rules, 2014 |
PAS-6 | Certificate of compliance with RBI regulations | Within 60 days from the end of each half-year | Rule 9A of Companies (Prospectus and Allotment of Securities) Rules, 2014 |
DPT-3 | Return of Deposits | By 30th June annually | Rule 16A of Companies (Acceptance of Deposits) Rules, 2014 |
ADT-1 | Appointment of Auditor | Within 15 days of AGM | Section 139 of the Companies Act, 2013 |
Pointers to Remember
Distinct Legal Identity
A public company has a separate legal existence from its members and directors.
Perpetual Succession
The company continues to exist even if there is a change in its ownership or management.
Raising Capital
Public companies can issue equity or preference shares, convertible instruments, or accept deposits.
Statutory Framework
Adherence to the Companies Act, 2013, and other regulations such as SEBI (if listed) is mandatory.
Summary
Public companies are pivotal to India’s economic and financial landscape, enabling large-scale fund mobilization and fostering investor trust. With their distinct legal identity, structured framework, and compliance requirements, public companies ensure transparent governance and perpetual existence.
Conclusion
The Public Company structure provides an ideal framework for businesses aiming for scalability, public ownership, and financial credibility. By adhering to the provisions of the Companies Act, 2013, public companies maintain robust governance and play a crucial role in economic development. Whether listed or unlisted, their contribution to India’s corporate and financial ecosystem remains unparalleled.