Companies Act Section 2(71) Public Company

Public Company Section 2 (71)

A Public Company is a type of company whose shares are freely traded on a stock exchange and can be owned by anyone, including the general public. It is characterized by its ability to raise capital from the public through the sale of shares and debentures.

Key Characteristics:

1. Shareholders and Ownership:

A Public Company must have a minimum of seven shareholders. 

There is no upper limit on the number of shareholders, and shares can be freely transferred subject to regulatory and compliance requirements.

Shares of a Public Company are listed on recognized stock exchanges, enabling liquidity and trading among investors.

2. Minimum Capital Requirements:

There is no minimum capital requirement for a Public Company under the Companies Act, 2013. 

It can be registered with a nominal share capital as decided by its promoters.

3. Directorial Requirements:

A Public Company must have a minimum of three directors. 

The directors are responsible for managing the company's affairs and ensuring compliance with legal and regulatory requirements.

4. Disclosure and Transparency:

Public Companies are subject to stringent disclosure and transparency norms. 

They are required to file periodic financial statements, annual reports, and other disclosures with the Registrar of Companies (ROC) and stock exchanges.

Compliance with Securities and Exchange Board of India (SEBI) regulations, listing agreements, and corporate governance guidelines is mandatory for Public Companies.

5. Corporate Governance:

Public Companies are expected to adhere to higher standards of corporate governance to protect shareholder interests, ensure transparency in operations, and enhance investor confidence.

Advantages:

Access to Capital: 

Public Companies can raise substantial capital from the public through initial public offerings (IPOs) and subsequent public issues of shares or debentures.  

Market Visibility: 

Listing on stock exchanges enhances the company's visibility and credibility in the market, potentially attracting institutional investors and expanding shareholder base.  

Liquidity: 

Shares of Public Companies are traded on stock exchanges, providing liquidity to shareholders who can buy or sell their holdings based on market conditions.

Compliance and Regulations:

Companies Act, 2013: 

Defines the regulatory framework for incorporation, management, governance, and winding-up of Public Companies.  

SEBI Regulations: 

Prescribe additional requirements for Public Companies related to disclosures, corporate actions, shareholder rights, insider trading, and other market-related activities.