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Public Limited Company

A public limited company is a company that has permission to offer its registered securities for sale to the general public, typically through a stock exchange, or occasionally a company whose stock is traded over the counter (OTC) via market makers who use non-exchange quotation services.

A public company is defined as a company which is not a private company. The following conditions apply only to a public company:

  • It must have at least seven shareholders.
  • A public company is not authorized to begin business upon the grant of the certificate of incorporation. In order to be eligible to start business as a corporation, it should obtain another document called "trading certificate".
  • It should publish a prospectus or file a statement in lieu of a prospectus before it can start transacting business.
  • A public company is needed to have at least three directors.
  • It should hold statutory meetings and obtain government approval for the appointment of the management.

Advantages of a Public Limited Company

  • The shareholders have limited liability.
  • A company can raise additional capital by issuing more shares or debentures.
  • Greater borrowing power.
  • A board of directors with experience/ expertise can be appointed.
  • Shareholders can sell/transfer their shares freely.

Disadvantages of a Public Limited Company

  • There is a loss of overall ownership.
  • There is a loss of control of the business.
  • Decisions take longer and there may be disagreement.
  • The personal touch may be lost.
  • When setting up a company, significant expenses are incurred.
  • There are more statutory regulations to conform.
  • Profits are shared amongst a far greater number of people.
  • Public disclosure of the financial affairs is necessary.
  • Published accounts have to be prepared.

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