How to Register a Public Limited Company in India: Members, Directors, Capital Raising and Compliance
A public limited company needs seven members and three directors, carries Limited in its name, and alone can offer securities to the public. Here is how it differs from a private company and what registration involves.
CA Harun Raaj
makeitlegit.in
A public limited company is the vehicle for businesses that want to grow beyond a closed circle of owners — more members, transferable shares, and eventually the ability to invite the public to invest. The Companies Act 2013 draws a sharp line between private and public companies, and crossing it changes almost every structural rule.
Public vs private: the core distinction
A public company is defined simply: it is a company which is not a private company, with a minimum paid-up share capital as may be prescribed (s.2(71), Companies Act 2013) — the Act no longer states a minimum figure. A subsidiary of a public company is deemed to be a public company even if its own articles keep it private (s.2(71), Companies Act 2013). A private company, by contrast, must by its articles restrict share transfers, limit members to two hundred (excluding employee-members), and prohibit any invitation to the public to subscribe for its securities (s.2(68), Companies Act 2013).
That contrast is the whole decision in one paragraph. Choose a public company when the plan needs many shareholders, freely transferable shares, or public fundraising. Stay private when ownership should remain closed and controlled.
Members: seven to start, no upper cap from the definition
A company may be formed by seven or more persons where it is to be a public company, against two or more for a private company, by subscribing to a memorandum and meeting registration requirements (s.3(1), Companies Act 2013). The public company has no two-hundred-member ceiling (excluding employee-members) of the kind the private company definition imposes (s.2(68)(ii), Companies Act 2013) — scale of ownership is its purpose.
Directors: minimum three
Every company must have a board of individual directors, with a minimum of three directors for a public company and two for a private company, up to a maximum of fifteen, extendable by special resolution (s.149(1), Companies Act 2013). Every company must also have at least one director who stays in India for not less than one hundred and eighty-two days during the financial year; for a newly incorporated company this applies proportionately at the end of the financial year in which it is incorporated (s.149(3), Companies Act 2013). The incorporation filing requires each first director's name, Director Identification Number, address, nationality, proof of identity and consent to act (s.7(1)(f)–(g), Companies Act 2013) — so a public company needs three consenting, identified directors before it files.
Name: ending in Limited
The memorandum of a public limited company carries the last word "Limited", against "Private Limited" for a private company (s.4(1)(a), Companies Act 2013). Reserve the name first: any person may apply to the Registrar for reservation of a proposed company name, in the prescribed form and manner with the prescribed fee (s.4(4), Companies Act 2013).
How registration works
Seven or more subscribers sign a memorandum and comply with registration requirements (s.3(1), Companies Act 2013). The filing goes to the Registrar of the jurisdiction of the proposed registered office: signed memorandum and articles, declarations of compliance by the professional and a named director, manager or secretary (s.7(1)(b), Companies Act 2013), declarations from each subscriber and first director, correspondence address, subscriber identity particulars, and first-director particulars with consent (s.7(1), Companies Act 2013). On those documents the Registrar registers the company, issues the certificate of incorporation and allots a corporate identity number included in the certificate (s.7(2)–(3), Companies Act 2013).
Incorporation is not the finish line: a company with share capital incorporated after the Companies (Amendment) Act 2019 cannot commence business or borrow until a director files a declaration that every subscriber has paid for the shares agreed to be taken, within one hundred and eighty days of incorporation, and the registered office has been verified with the Registrar (s.10A(1), Companies Act 2013).
Capital raising: what only a public company can do
This is the decisive advantage. A public company may issue securities to the public through a prospectus — a "public offer" — by complying with that Part of the Act, or through private placement, or through a rights or bonus issue (s.23(1), Companies Act 2013). A private company is confined to rights or bonus issues and private placement (s.23(2), Companies Act 2013) — it can never invite the public.
A prospectus means any document described or issued as one, including a red herring or shelf prospectus, or any notice, circular, advertisement or document inviting public offers for subscription or purchase of securities (s.2(70), Companies Act 2013). Every company making a public offer must issue the securities only in dematerialised form under the Depositories Act 1996 (s.29(1), Companies Act 2013). Separately, every unlisted public company must issue its securities only in dematerialised form and facilitate dematerialisation of its existing securities (rule 9A(1), Companies (Prospectus and Allotment of Securities) Rules 2014, inserted in 2018; s.29(1)(b), Companies Act 2013) — so depository arrangements are needed early, not only at a public offer. The rules provide some exemptions for particular kinds of company; confirm the current text of rule 9A before relying on any exemption.
Converting a private company into a public one
A company may by special resolution alter its articles, including alterations converting a private company into a public company or the reverse, though a public-to-private conversion also needs an order of the Central Government (s.14(1), second proviso, Companies Act 2013). Where a private company alters its articles so they no longer include the restrictions required of a private company, it ceases to be private from the date of alteration (s.14(1), Companies Act 2013). In practice the conversion means removing the transfer restrictions, member limit and public-invitation prohibition, raising the board to three directors (s.149(1), Companies Act 2013), and changing the name from "Private Limited" to "Limited", which needs no Central Government approval where only the word "Private" is deleted on conversion (s.13(2) proviso; s.4(1)(a), Companies Act 2013). Membership must be kept at seven or more: if a public company carries on business for more than six months with fewer than seven members, every member who knows of it becomes severally liable for the company's debts contracted during that time (s.3A, Companies Act 2013). The alteration of articles, with a printed copy of the altered articles, must be filed with the Registrar within fifteen days (s.14(2), Companies Act 2013). Plan it before the fundraising that needs it, not during.
A trap for subsidiaries: deemed public companies
A company that is a subsidiary of a public company is deemed to be a public company for the purposes of the Act, even where it continues to be a private company in its own articles (s.2(71), Companies Act 2013). Founders who place a new venture under an existing public company as a subsidiary should know the venture inherits public-company regulation regardless of what its articles say.
Private vs public at a glance
| Question | Private company | Public company |
|---|---|---|
| Minimum members | Two (s.3(1), Companies Act 2013) | Seven (s.3(1), Companies Act 2013) |
| Minimum directors | Two (s.149(1), Companies Act 2013) | Three (s.149(1), Companies Act 2013) |
| Name ending | "Private Limited" (s.4(1)(a), Companies Act 2013) | "Limited" (s.4(1)(a), Companies Act 2013) |
| Share transfers | Restricted by articles (s.2(68), Companies Act 2013) | Freely transferable (s.58(2), Companies Act 2013) |
| Public fundraising | Never — rights, bonus or private placement only (s.23(2), Companies Act 2013) | Public offer through prospectus, plus the rest (s.23(1), Companies Act 2013) |
Extra compliance to expect
Public status brings obligations a private company avoids: a three-director board instead of two (s.149(1), Companies Act 2013), a seven-member base instead of two (s.3(1), Companies Act 2013), prospectus discipline for any public offer (s.23(1), Companies Act 2013), dematerialised securities for an unlisted public company (rule 9A(1), Companies (Prospectus and Allotment of Securities) Rules 2014, subject to exemptions to be confirmed in the current rule), and the loss of the closed-circle protections — shares are freely transferable (s.58(2), Companies Act 2013). Every listed public company needs at least one-third independent directors (s.149(4), Companies Act 2013). A public company needs at least two independent directors once its paid-up share capital is ten crore rupees or more, its turnover one hundred crore rupees or more, or its outstanding loans, debentures and deposits together exceed fifty crore rupees, and a woman director at one hundred crore rupees paid-up capital or three hundred crore rupees turnover (rules 3 and 4, Companies (Appointment and Qualification of Directors) Rules 2014, as notified in 2014; later amendments exempt some unlisted companies, so confirm the current text before relying on these thresholds). For listed companies and those intending to list, SEBI administers the Act's Chapter III and IV provisions on issue and transfer of securities, and s.127 on non-payment of dividend (s.24(1), Companies Act 2013).
FAQ
How many members are needed to register a public limited company?
Seven or more persons subscribing to the memorandum (s.3(1), Companies Act 2013). A private company needs only two (s.3(1), Companies Act 2013).
How many directors does a public limited company need?
A minimum of three directors, against two for a private company and one for a One Person Company, up to fifteen unless extended by special resolution (s.149(1), Companies Act 2013). At least one director must stay in India for not less than one hundred and eighty-two days in the financial year, applied proportionately in the year of incorporation for a new company (s.149(3), Companies Act 2013).
What is the difference between a private and a public limited company?
A private company restricts share transfers, caps members at two hundred (excluding employee-members) and cannot invite the public to subscribe (s.2(68), Companies Act 2013). A public company is simply one that is not private, with a prescribed minimum paid-up capital (s.2(71), Companies Act 2013) — the Act no longer states a minimum figure — needs seven members and three directors, ends its name with "Limited" (s.4(1)(a), Companies Act 2013), and alone can make a public offer through a prospectus (s.23(1), Companies Act 2013).
Can a public limited company raise money from the public?
Yes — it may issue securities to the public through a prospectus by complying with the relevant Part of the Act (s.23(1), Companies Act 2013). A prospectus includes any document inviting public subscription (s.2(70), Companies Act 2013), and public-offer securities must be in dematerialised form (s.29(1), Companies Act 2013). Even without a public offer, an unlisted public company must issue its securities only in dematerialised form (rule 9A(1), Companies (Prospectus and Allotment of Securities) Rules 2014), subject to any exemption in the current rule.
How do I convert a private limited company into a public limited company?
By special resolution altering the articles to remove the private-company restrictions, on which it ceases to be private from the alteration date (s.14(1), Companies Act 2013) — with membership kept at seven or more (s.3A, Companies Act 2013), directors raised to three (s.149(1), Companies Act 2013), "Private Limited" changed to "Limited" (s.13(2) proviso; s.4(1)(a), Companies Act 2013), and the altered articles filed with the Registrar within fifteen days (s.14(2), Companies Act 2013).
If my company is a subsidiary of a public company, is it public too?
Yes — a subsidiary of a public company is deemed to be a public company for the purposes of the Act, even if its own articles keep it private (s.2(71), Companies Act 2013).
What documents are required for public company registration?
Signed memorandum and articles, professional compliance declaration, subscriber and director declarations, correspondence address, subscriber identity proofs, and first-director particulars with Director Identification Numbers and consent (s.7(1), Companies Act 2013) — with seven subscribers and three directors as the structural minimum (s.3(1), Companies Act 2013; s.149(1), Companies Act 2013).
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