Question

What is public company?

Define Public Limited Company.

What is a Public Limited Company?

Answer 1

A public company is defined as one that offers a part of its ownership in the form of shares, debentures, bonds, or securities to the general public through the stock market. There must be a minimum of seven members to form a public company. As per section 3 (1) (iv) of the Companies Act 1956, a public company means a company which:

1. is not a private company,
2. has a minimum paid-up capital of Rs. 5,00,000 or such higher paid-up capital as may be prescribed,
3. is a private company, being a subsidiary of a company which is not a private company.

A public company should not be mistakenly understood as a publicly owned company, as the latter is exclusively owned and controlled by the government. A public company issues its shares to the general public without any restriction on the maximum number of persons. A public company can be segmented into two types:

1. Listed Company: A Company whose shares are listed and traded in the stock exchange, like Tata Motors, Reliance, etc.
2. Unlisted Company: A Company whose shares are not listed on the stock exchange and thereby these shares cannot be traded on the stock exchange.