By Manu Rao | Updated March 2026
What Is a Public Limited Company?
A Public Limited Company is a business entity registered under the Companies Act 2013 that can invite the general public to subscribe to its shares and debentures. It requires a minimum of 7 members and 3 directors (Section 149(1)). There is no cap on the maximum number of members. The company name ends with "Limited" or "Ltd."
Public companies are subject to stricter governance norms than Private Limited Companies. They must comply with SEBI regulations if listed on a stock exchange.
Legal Framework
The Companies Act 2013 governs public limited companies. Key provisions:
- Section 2(71) — Defines a public company (any company that is not a private company)
- Section 3(1)(a) — Minimum 7 members for incorporation
- Section 149(1) — Minimum 3 directors required
- Section 149(4) — At least one-third of the board must be independent directors (for listed companies)
- Section 152(6) — At least two-thirds of directors must be liable to retire by rotation
- Section 23 — Can issue securities to public through prospectus
Listed vs. Unlisted Public Companies
Not all public companies are listed. An unlisted public company functions much like a listed one in terms of MCA compliance, but it escapes SEBI listing obligations (LODR regulations). Many foreign-invested companies in India are unlisted public companies — they chose the public structure for governance reasons or because they plan to go for an IPO later.
FDI Rules for Foreign Investors
Foreign investment in public limited companies follows the same FDI framework as private companies under FEMA (Non-debt Instruments) Rules 2019. The DPIIT Consolidated FDI Policy applies sector-wise caps and route requirements.
Key FDI compliance for public companies:
- Form FC-GPR — Report foreign investment to RBI within 30 days of share allotment
- Form FC-TRS — Report share transfers between residents and non-residents
- Sectoral caps — Same limits apply as for private companies (e.g., 49% in insurance, 26% in digital media)
- Automatic vs. Government route — Route depends on sector, not company type
Public companies with foreign investment above prescribed thresholds must file an Annual Return on Foreign Liabilities and Assets (FLA) with RBI by July 15 each year.
Incorporation Process
Setting up a public limited company involves more steps than a private company:
- Obtain DSC for all proposed directors (minimum 3)
- Get DIN for all directors through SPICe+
- Reserve company name through RUN
- File SPICe+ with MOA and AOA signed by minimum 7 subscribers
- Set authorized capital — no statutory minimum, but practical minimum is Rs. 5 lakh
- Receive Certificate of Incorporation
- Appoint a full-time Company Secretary if paid-up capital exceeds Rs. 5 crore (Section 203)
Foreign subscribers must submit apostilled passport copies, address proof not older than 2 months, and notarized declarations.
Governance Requirements
Public companies face heavier governance requirements than private companies:
| Requirement | Public Limited | Private Limited |
|---|---|---|
| Minimum members | 7 | 2 |
| Minimum directors | 3 | 2 |
| Independent directors | Required (if listed) | Not required |
| Company Secretary | Required if paid-up capital > Rs. 5 crore | Required if paid-up capital > Rs. 5 crore |
| Share transfer restrictions | No restriction (freely transferable) | Restricted per AOA |
| Board meetings per year | Minimum 4 | Minimum 4 |
| Quorum for general meetings | 5 members present in person (for up to 1,000 members) | 2 members present in person |
Annual Compliance
Public companies must file:
- AOC-4 — Financial statements within 30 days of AGM
- MGT-7 — Annual return (not MGT-7A, which is simplified for small/OPC companies) within 60 days of AGM
- ADT-1 — Auditor appointment within 15 days of AGM
- DIR-3 KYC — Director KYC for all directors by September 30
- MR-3 — Secretarial audit report (if applicable under Section 204)
Statutory audit is always mandatory. If the company is listed, it must also file quarterly financial results with stock exchanges and comply with Regulation 33 of SEBI (LODR) Regulations 2015.
Common Mistakes Foreign Investors Make
- Choosing public when private suffices — Most foreign investors do not need a public company. The compliance burden is higher, governance is stricter, and there is no benefit unless you plan to list shares or need more than 200 members.
- Ignoring the 7-member minimum — If membership falls below 7 for more than 6 months and the company carries on business, every member aware of this fact becomes personally liable for debts incurred after the 6-month period (Section 3A).
- Missing the Company Secretary appointment — Section 203 mandates a full-time CS for public companies meeting the paid-up capital threshold. Non-compliance attracts penalties under Section 203(4).
- Forgetting SEBI compliance for listed companies — If the company lists on BSE or NSE, it enters SEBI's jurisdiction. Reporting obligations multiply — insider trading disclosures, related party transaction approvals, quarterly results, and corporate governance reports.
Practical Example
A Japanese electronics manufacturer wants to set up a large-scale production unit in India. They plan to eventually list on the BSE within 5 years. They incorporate a public limited company with 8 members (5 nominees from the Japanese parent company and 3 Indian residents). The electronics manufacturing sector permits 100% FDI under the automatic route.
They appoint 4 directors — 2 Japanese nationals and 2 Indian residents (one of whom satisfies the resident director requirement under Section 149(3)). With authorized capital of Rs. 50 crore, they pay the MCA registration fee based on the slab rate. A Company Secretary is appointed from day one as the paid-up capital exceeds Rs. 5 crore.
Foreign investment is reported to RBI through Form FC-GPR on the FIRMS portal within 30 days. The company files FLA return with RBI by July 15 annually.
When Should Foreign Investors Choose a Public Company?
In most cases, a Private Limited Company serves foreign investors better. Choose a public company only if you plan to list shares on Indian exchanges, need more than 200 members, or want shares to be freely transferable without board restriction. For early-stage market entry, the private limited route is simpler and more cost-effective.
Talk to us at Beacon Filing to figure out which structure fits your investment plan.