50 Frequently Asked Questions About Public Limited Company (PLC) Firms in India

Table of Contents

What is a Public Limited Company (PLC)?

A Public Limited Company (PLC) is a type of business entity in India that is publicly traded on a stock exchange. This means that the company’s shares are available for purchase by the general public, and the company is required to comply with regulations related to public disclosure, financial reporting, and corporate governance. A PLC is a separate legal entity from its shareholders, and it can own property, enter into contracts, and engage in business activities in its own name. The liability of the shareholders in a PLC is limited to the amount they have invested in the company.

What is the minimum number of shareholders required to form a PLC?

The minimum number of shareholders required to form a PLC in India is seven. This is specified in the Companies Act, 2013, which is the primary legislation governing the formation and operation of companies in India. The Act also sets out other requirements for the formation of a PLC, such as the need to have a minimum amount of authorized and paid-up share capital, and the need to appoint at least three directors. Additionally, the Act requires that the name of the proposed company must end with the words “Public Limited Company” or “PLC”.

How is a PLC different from a Private Limited Company?

A Public Limited Company (PLC) is different from a Private Limited Company (Pvt Ltd) in several ways:

Number of shareholders:

A Pvt Ltd company can have a maximum of 200 shareholders, whereas a PLC can have an unlimited number of shareholders.

Transferability of shares:

In a Pvt Ltd company, shares cannot be freely transferred or sold to the public, whereas in a PLC, shares can be traded on a stock exchange and can be freely bought and sold by the public.

Capital requirements:

The minimum capital required to form a Pvt Ltd company is Rs 1 lakh, whereas the minimum capital required to form a PLC is Rs 5 lakh.

Public disclosure requirements:

A PLC is required to make more extensive public disclosures about its financial performance, management structure, and governance than a Pvt Ltd company.

Appointment of directors:

A Pvt Ltd company can have a minimum of two directors, whereas a PLC must have at least three directors.

Corporate governance requirements:

A PLC is subject to more stringent corporate governance requirements, such as the need to have an independent board of directors and a separate audit committee, than a Pvt Ltd company.

Overall, a PLC is a more complex and regulated entity than a Pvt Ltd company, and is generally suitable for larger businesses that require access to public capital markets and have more extensive reporting and compliance requirements.

Can a PLC issue shares to the public?

Yes, a Public Limited Company (PLC) can issue shares to the public through an initial public offering (IPO) or a follow-on public offer (FPO). An IPO is the first time a company issues its shares to the public, while an FPO is a subsequent offering of shares to the public after the company is already listed on a stock exchange.

To issue shares through an IPO or FPO, a PLC must comply with regulatory requirements set by the Securities and Exchange Board of India (SEBI), such as the need to file a prospectus, which is a detailed document that provides information about the company’s business operations, financial performance, management team, and risks associated with investing in the company. The company must also appoint an investment bank or merchant banker to manage the issuance and ensure compliance with regulatory requirements.

The public offering of shares allows a PLC to raise funds from a large number of investors, which can be used to finance business expansion, pay off debt, or for other purposes. Additionally, the public listing of shares provides liquidity to shareholders, as they can buy and sell their shares on the stock exchange.

What is the minimum amount of capital required to form a PLC?

The minimum amount of capital required to form a Public Limited Company (PLC) in India is Rs 5 lakhs. This is the minimum authorized share capital that a PLC must have at the time of its incorporation. The authorized share capital is the maximum amount of capital that the company is authorized to issue to its shareholders. The paid-up share capital, on the other hand, is the actual amount of capital that has been paid by the shareholders to the company in exchange for shares.

It’s worth noting that while the minimum authorized share capital for a PLC is Rs 5 lakhs, there is no requirement that the entire amount be subscribed to or paid up at the time of incorporation. However, the company must have a minimum paid-up share capital of Rs 5 lakhs within two years of its incorporation.

Can a PLC raise capital through private placement of shares?

Yes, a Public Limited Company (PLC) can raise capital through private placement of shares. Private placement is a method of raising capital by selling shares to a select group of investors, such as institutional investors, high net worth individuals, or private equity funds, without making a public offering of the shares.

To issue shares through private placement, a PLC must comply with regulatory requirements set by the Securities and Exchange Board of India (SEBI), such as the need to file a private placement offer letter with SEBI, which is a detailed document that provides information about the company’s business operations, financial performance, management team, and risks associated with investing in the company. The company must also appoint an investment bank or merchant banker to manage the issuance and ensure compliance with regulatory requirements.

Private placement is a popular method of raising capital for PLCs, as it allows the company to access funds from a select group of investors without the cost and regulatory requirements associated with a public offering of shares. However, private placement is subject to certain limitations, such as the need to comply with a cap on the number of investors who can participate in the offering, and restrictions on the transferability of the shares issued through private placement.

What is the maximum number of shareholders a PLC can have?

A Public Limited Company (PLC) in India can have an unlimited number of shareholders. Unlike a Private Limited Company, which is restricted to a maximum of 200 shareholders, a PLC can have any number of shareholders who hold shares in the company. This means that a PLC can raise capital by issuing shares to a large number of investors, which can be traded on a stock exchange.

However, it’s important to note that having a large number of shareholders can make it more challenging for a PLC to manage its shareholder base, as it may require more extensive communication and reporting requirements, such as holding regular shareholder meetings and making public disclosures about the company’s financial performance and management structure. Additionally, having a large number of shareholders can make it difficult to obtain a quorum at shareholder meetings, as a certain percentage of shareholders must be present in order to conduct official business.

What is the minimum number of directors required for a PLC?

A Public Limited Company (PLC) in India must have a minimum of three directors on its board of directors. The Companies Act, 2013 requires that every company, including a PLC, must have a minimum of three directors, at least one of whom must be a resident of India. A resident director is someone who has stayed in India for a total period of not less than 182 days in the previous calendar year.

In addition to the minimum number of directors, a PLC may have a maximum of 15 directors on its board, unless it passes a special resolution to increase the maximum number of directors. However, if a PLC has a paid-up share capital of Rs. 100 crores or more, or a turnover of Rs. 300 crores or more, it must have at least one woman director on its board.

The board of directors is responsible for the overall management and direction of the company, including setting strategic goals, overseeing day-to-day operations, and ensuring compliance with legal and regulatory requirements. Directors are elected by the shareholders of the company at the annual general meeting and serve for a fixed term, which is typically three years.

How are the directors of a PLC appointed?

The directors of a Public Limited Company (PLC) in India are appointed by the shareholders of the company. The process for appointment of directors typically involves the following steps:

Call for Board Meeting:

The board of directors must call a board meeting to pass a resolution for the appointment of a new director or to fill a vacancy on the board.

Obtain Director Identification Number (DIN):

Every individual who wishes to be appointed as a director of a company must obtain a Director Identification Number (DIN) from the Ministry of Corporate Affairs (MCA).

Obtain Digital Signature Certificate (DSC):

Every director must obtain a Digital Signature Certificate (DSC) to sign electronic documents and filings with the Registrar of Companies (ROC).

Conduct Background Check:

The company must conduct a background check of the proposed director to ensure that they meet the eligibility criteria and are not disqualified from holding the position of director.

Obtain Consent:

The proposed director must provide their consent in writing to act as a director of the company.

File Form DIR-12:

The company must file Form DIR-12 with the ROC within 30 days of the appointment of a new director or filling of a vacancy on the board.
The appointment of directors is subject to the provisions of the Companies Act, 2013, which sets out certain eligibility criteria, such as a minimum age of 21 years, sound mind and not being an undischarged insolvent, and disqualification criteria, such as being convicted of an offense involving moral turpitude, being declared as a bankrupt, or being disqualified by a court or regulatory authority.

Can a person be a director in more than one PLC?

Yes, a person can be a director in more than one Public Limited Company (PLC) in India. However, there are certain conditions and restrictions on the number of directorships that a person can hold simultaneously. As per the Companies Act, 2013, a person can hold up to 20 directorships, of which a maximum of 10 can be public companies. Additionally, the total number of directorships that a person can hold may be further limited by the company’s articles of association or by other regulatory requirements.

It’s important to note that serving as a director in multiple companies can be time-consuming and may require significant dedication and expertise. Directors are responsible for overseeing the management and affairs of the company, ensuring compliance with legal and regulatory requirements, and protecting the interests of shareholders. Serving as a director in multiple companies may also present conflicts of interest or competing demands on the individual’s time and attention. Therefore, it’s important for individuals to carefully consider their commitments and obligations before accepting directorships in multiple companies.

What is the tenure of a director in a PLC?

The tenure of a director in a Public Limited Company (PLC) in India is typically three years, as per the Companies Act, 2013. The articles of association of the company may also specify the term of office for directors, which can be shorter or longer than three years.

At the end of the director’s term, they may be re-appointed or replaced by the shareholders of the company. The re-appointment or replacement of directors is typically done at the annual general meeting (AGM) of the company, which must be held within six months of the end of the financial year.

It’s important to note that directors can be removed from their position before the end of their term by the shareholders of the company, as per the provisions of the Companies Act, 2013. This can happen in certain situations, such as if the director becomes disqualified or is convicted of an offense, if they are found to have acted in breach of their duties, or if they become incapacitated or otherwise unable to perform their duties as director.

How are the shares of a PLC transferred?

The shares of a Public Limited Company (PLC) in India can be transferred by following the process outlined in the Companies Act, 2013 and the articles of association of the company. The process typically involves the following steps:

Obtain Share Transfer Deed:

The transferor (current shareholder) must obtain a share transfer deed in the prescribed format from the company or from a stock exchange where the shares are listed.

Execute Share Transfer Deed:

The transferor must fill out the share transfer deed and sign it along with the transferee (new shareholder). The transferor must also affix their share transfer stamps, if applicable.

Deliver Share Transfer Deed:

The transferor must deliver the share transfer deed to the company, along with the share certificate(s) that represent the shares being transferred.

Register Transfer:

The company must register the transfer of shares in its records and update its share register. The company may also require additional documentation or information to complete the transfer, such as proof of payment for the shares, proof of identity and address of the transferee, or a no-objection certificate from the Income Tax Department.

Issue New Share Certificate:

Once the transfer is registered, the company must issue a new share certificate in the name of the transferee and cancel the old share certificate(s) that represented the shares being transferred.

It’s important to note that the transfer of shares is subject to certain legal and regulatory requirements, such as stamp duty, capital gains tax, and compliance with the rules and regulations of stock exchanges, if the shares are listed. Shareholders must also ensure that the transfer complies with any restrictions or limitations on transferability of shares that are specified in the articles of association of the company or in any agreements between shareholders.

Can a shareholder transfer his/her shares to a non-shareholder?

Yes, a shareholder of a Public Limited Company (PLC) in India can transfer their shares to a non-shareholder. However, the transfer of shares must follow the process outlined in the Companies Act, 2013 and the articles of association of the company. Additionally, the company may have certain restrictions or limitations on transferability of shares that are specified in its articles of association or in any agreements between shareholders.

It’s important to note that the transfer of shares to a non-shareholder may have certain legal and regulatory implications, such as compliance with stamp duty, capital gains tax, and other tax laws. The company may also require additional documentation or information to complete the transfer, such as proof of identity and address of the transferee, or a no-objection certificate from the Income Tax Department. Shareholders who are considering transferring their shares to a non-shareholder should seek legal and tax advice to ensure that the transfer is done in compliance with applicable laws and regulations.

What is the role of a company secretary in a PLC?

The role of a Company Secretary in a Public Limited Company (PLC) in India is to ensure that the company complies with legal and regulatory requirements and to facilitate effective communication between the company’s board of directors, shareholders, and other stakeholders. Some of the specific responsibilities of a Company Secretary in a PLC may include:

Compliance:

Ensuring that the company complies with legal and regulatory requirements, such as filing of various forms and returns with the Registrar of Companies, maintaining statutory registers, and complying with various corporate governance norms.

Board Meetings:

Facilitating board meetings, including preparing the agenda, taking minutes, and ensuring that the decisions taken at the meetings are properly recorded and implemented.

Shareholder Meetings:

Facilitating shareholder meetings, including preparing the notice, conducting the meeting, and ensuring that the resolutions passed at the meeting are properly recorded and implemented.

Corporate Governance:

Ensuring that the company follows good corporate governance practices, such as maintaining transparency and accountability, and ensuring that the interests of all stakeholders are protected.

Communication:

Facilitating effective communication between the board of directors, shareholders, and other stakeholders, including responding to queries and concerns from shareholders and other stakeholders.

It’s important to note that the role of a Company Secretary in a PLC is critical to the smooth functioning of the company and ensuring compliance with legal and regulatory requirements. As such, the Company Secretary must be qualified and competent to carry out their duties and responsibilities effectively.

Can a PLC have a registered office outside India?

No, a Public Limited Company (PLC) registered in India must have its registered office within India. According to the Companies Act, 2013, a company’s registered office is the address at which all communications and notices from the government, shareholders, and other stakeholders are sent. The registered office must be open and accessible to the public during business hours.

Furthermore, the registered office address must be stated in the company’s memorandum of association, and any change in the registered office address must be intimated to the Registrar of Companies (ROC) within 30 days of the change. Failure to comply with these requirements may result in penalties and fines.

Therefore, a PLC registered in India cannot have a registered office outside India. However, a company may have branch offices or subsidiaries outside India, subject to compliance with the relevant laws and regulations in those countries.

What is the process of incorporating a PLC in India?

The process of incorporating a Public Limited Company (PLC) in India involves the following steps:

Obtaining Digital Signature Certificate (DSC):

The first step is to obtain a DSC for all the proposed directors of the company. A DSC is a digital signature that is required for online filing of forms with the Ministry of Corporate Affairs (MCA).

Obtaining Director Identification Number (DIN):

The next step is to obtain a DIN for all the proposed directors. A DIN is a unique identification number that is required for all directors of a company.

Name Approval:

The company name must be approved by the Registrar of Companies (ROC). The proposed name must be unique, not similar to any existing company name, and must not violate any trademarks or copyrights. The name can be checked and reserved through the MCA’s online portal.

Memorandum and Articles of Association:

The Memorandum of Association (MOA) and Articles of Association (AOA) must be drafted and filed with the ROC. The MOA specifies the main objects and activities of the company, while the AOA defines the rules and regulations for the company’s internal management.

Filing of Incorporation Forms:

Once the name is approved and the MOA and AOA are drafted, the next step is to file the incorporation forms with the ROC. The forms include the SPICe (Simplified Proforma for Incorporating Company Electronically) form, which is an integrated form for obtaining PAN, TAN, and other regulatory compliances.

Payment of Fees and Stamp Duty:

The prescribed fees and stamp duty must be paid at the time of filing the incorporation forms.

Certificate of Incorporation:

Once the ROC verifies the documents and approves the incorporation, a Certificate of Incorporation (COI) is issued. The COI is the legal proof of the company’s existence.

It is important to note that the process of incorporating a PLC in India may vary depending on the specific circumstances and requirements of the company. It is advisable to seek professional advice and assistance to ensure compliance with all the legal and regulatory requirements.

Can a foreign national be a shareholder or director in a PLC?

Yes, a foreign national can be a shareholder or director in a Public Limited Company (PLC) in India. The Companies Act, 2013, does not differentiate between Indian and foreign shareholders or directors.

However, there are certain requirements and restrictions that foreign nationals must comply with, such as obtaining a valid business visa, registering with the Reserve Bank of India (RBI), and complying with the Foreign Exchange Management Act (FEMA) regulations.

Foreign nationals who wish to be directors in a PLC must also obtain a Director Identification Number (DIN) and meet the eligibility criteria prescribed under the Companies Act, 2013.

Furthermore, foreign shareholders and directors must also comply with the tax laws and regulations in India, including the Income Tax Act, 1961, and the Double Taxation Avoidance Agreements (DTAAs) between India and their home country.

It is advisable to seek professional advice and assistance to ensure compliance with all the legal and regulatory requirements for foreign nationals investing in or operating a PLC in India.

What is the procedure for changing the name of a PLC?

The procedure for changing the name of a Public Limited Company (PLC) in India involves the following steps:

Board Resolution:

The first step is to pass a board resolution to approve the proposed name change and authorize a director or company secretary to make the necessary application to the Registrar of Companies (ROC).

Name Approval:

Once the board resolution is passed, the company must apply for name approval to the ROC by filing the Form INC-24. The proposed name must be unique, not similar to any existing company name, and must not violate any trademarks or copyrights.

Shareholder Approval:

After receiving the name approval from the ROC, the company must call for a general meeting of the shareholders to pass a special resolution approving the name change.

Filing of Form MGT-14:

The company must file Form MGT-14 with the ROC within 30 days of passing the special resolution. The form must be accompanied by a copy of the special resolution and the minutes of the general meeting.

Issue of Certificate of Incorporation:

Once the ROC verifies the documents and approves the name change, a new Certificate of Incorporation (COI) is issued with the new name. The company must update its legal documents, such as the Memorandum of Association (MOA), Articles of Association (AOA), and other registration certificates, with the new name.

It is important to note that the entire process of changing the name of a PLC may take several weeks and involve various legal and regulatory requirements. It is advisable to seek professional advice and assistance to ensure compliance with all the legal and regulatory requirements.

Can a PLC have a different trading name?

Yes, a Public Limited Company (PLC) in India can have a different trading name, which is also known as a “doing business as” (DBA) name or a “fictitious” name.

To operate under a different trading name, a PLC must register the name as a trademark or a trade name with the relevant authorities, such as the Trademark Registry or the Registrar of Companies (ROC). The registration process involves filing the necessary forms and paying the prescribed fees.

Once the trading name is registered, the PLC can use the name for all its business activities and transactions. However, the PLC must also ensure that it complies with all the legal and regulatory requirements, such as maintaining accurate records of its transactions and disclosing the registered name and trading name in all its legal and business documents.

It is advisable to seek professional advice and assistance to ensure compliance with all the legal and regulatory requirements for registering and using a different trading name for a PLC in India.

What is the procedure for issuing bonus shares in a PLC?

The procedure for issuing bonus shares in a Public Limited Company (PLC) in India involves the following steps:

Board Resolution:

The first step is to pass a board resolution to approve the issuance of bonus shares and to determine the ratio or percentage of bonus shares to be issued.

Shareholder Approval:

After the board resolution is passed, the company must call for a general meeting of the shareholders to approve the issuance of bonus shares. The company must provide notice of the meeting to all shareholders at least 21 days before the meeting.

Filing of Forms with ROC:

Once the shareholders approve the issuance of bonus shares, the company must file the necessary forms with the Registrar of Companies (ROC), such as Form MGT-14 and Form SH-4, which contain details of the bonus shares and the shareholders who are entitled to receive them.

Allotment of Bonus Shares:

After the ROC approves the forms, the company must allot the bonus shares to the eligible shareholders. The bonus shares are issued out of the company’s reserves, and the company must update its share register and other records accordingly.

Intimation to Stock Exchanges:

The company must also inform the stock exchanges on which its shares are listed about the issuance of bonus shares and provide them with the necessary details.

It is important to note that the issuance of bonus shares is subject to various legal and regulatory requirements, and the company must ensure compliance with all such requirements. It is advisable to seek professional advice and assistance to ensure proper compliance and avoid any legal or regulatory issues.

Can a PLC buy back its own shares?

Yes, a Public Limited Company (PLC) in India can buy back its own shares, subject to the provisions of the Companies Act, 2013 and the Securities and Exchange Board of India (Buy-Back of Securities) Regulations, 2018.

The procedure for buyback of shares by a PLC involves the following steps:

Board Resolution:

The first step is to pass a board resolution to approve the buyback of shares and to determine the number and price of the shares to be bought back.

Shareholder Approval:

After the board resolution is passed, the company must call for a general meeting of the shareholders to approve the buyback of shares. The company must provide notice of the meeting to all shareholders at least 21 days before the meeting.

Filing of Forms with ROC:

Once the shareholders approve the buyback of shares, the company must file the necessary forms with the Registrar of Companies (ROC), such as Form SH-8 and Form MGT-14, which contain details of the buyback.

Open Market Purchase or Tender Offer:

The company can buy back its shares through an open market purchase or a tender offer to its shareholders. The company must comply with the pricing and timing requirements specified in the regulations.

Intimation to Stock Exchanges:

The company must also inform the stock exchanges on which its shares are listed about the buyback and provide them with the necessary details.

It is important to note that the buyback of shares is subject to various legal and regulatory requirements, and the company must ensure compliance with all such requirements. It is advisable to seek professional advice and assistance to ensure proper compliance and avoid any legal or regulatory issues.

What is the procedure for declaring dividends in a PLC?

 

The procedure for declaring dividends in a Public Limited Company (PLC) in India involves the following steps:

Board Meeting:

The first step is to convene a meeting of the board of directors of the company. The board must pass a resolution recommending the payment of dividends to the shareholders.

Declaration of Dividend:

After the board approves the payment of dividends, the company must declare the dividend by passing a resolution at a general meeting of the shareholders. The company must provide notice of the meeting to all shareholders at least 21 days before the meeting.

Payment of Dividend:

Once the dividend is declared, the company must pay the dividend to the shareholders within 30 days of the declaration.

Dividend Warrant or Electronic Transfer:

The dividend may be paid by issuing a dividend warrant or by electronic transfer to the bank accounts of the shareholders.

It is important to note that the declaration of dividend is subject to the availability of profits and the approval of the shareholders. The company must ensure compliance with all legal and regulatory requirements related to the payment of dividends.

What is the role of the Registrar of Companies in a PLC?

In India, the Registrar of Companies (ROC) is an office under the Ministry of Corporate Affairs (MCA) that is responsible for administering the provisions of the Companies Act, 2013 and other related legislation. The ROC plays an important role in the functioning of a Public Limited Company (PLC) by performing various regulatory and administrative functions, such as:

Incorporation of Companies:

The ROC is responsible for processing and approving applications for the incorporation of PLCs in India.

Maintenance of Registers:

The ROC maintains various registers, such as the Register of Members, Register of Directors and Key Managerial Personnel, and Register of Charges.

Filing of Documents:

The ROC requires PLCs to file various forms, returns, and other documents, such as annual returns and financial statements, with the ROC. These filings must be made in accordance with the prescribed timelines and formats.

Regulatory Compliance:

The ROC ensures that PLCs comply with various legal and regulatory requirements, such as those related to shareholding, corporate governance, and disclosure of information.

Inspections and Investigations:

The ROC has the power to inspect and investigate the affairs of a PLC to ensure compliance with legal and regulatory requirements. The ROC may also take appropriate action against companies that violate these requirements.

In summary, the ROC plays a crucial role in ensuring that PLCs comply with legal and regulatory requirements, and in maintaining transparency and accountability in corporate governance.

Can a PLC issue different classes of shares?

Yes, a Public Limited Company (PLC) in India can issue different classes of shares, such as equity shares and preference shares, with varying rights and privileges attached to each class.

Equity shares are the ordinary shares of the company that carry voting rights and are entitled to dividends based on the profits of the company. Preference shares, on the other hand, are a class of shares that typically carry preferential rights over equity shares, such as a fixed rate of dividend, priority in payment of dividend, and preferential rights in case of winding up or liquidation of the company.

PLCs can also issue different classes of equity shares with differential voting rights (DVRs), where certain classes of shares may carry more or less voting rights than other classes. The Companies Act, 2013 provides for the issuance of DVRs subject to certain conditions, such as the approval of the shareholders by a special resolution and compliance with the prescribed limits on the percentage of share capital that can be issued with DVRs.

The issuance of different classes of shares is a common practice among PLCs to meet the varied preferences and requirements of investors and to raise capital more efficiently.

What are the rights of preference shareholders in a PLC?

Preference shareholders in a Public Limited Company (PLC) are entitled to certain preferential rights over equity shareholders, as specified in the terms of the issue of the preference shares. Some of the common rights of preference shareholders in a PLC are:

Fixed Dividend:

Preference shareholders are entitled to receive a fixed rate of dividend on their shares, as specified in the terms of issue. This dividend is typically paid out before any dividend is paid to equity shareholders.

Priority in Payment of Dividend:

In case of insufficient profits or losses, preference shareholders have the right to receive dividends in priority to equity shareholders.

Priority in Return of Capital:

In case of winding up or liquidation of the company, preference shareholders have the right to receive their capital invested in the company before equity shareholders.

Redemption:

Preference shares may be issued with an option for the company to redeem them after a specified period. This means that the company can buy back the shares from the shareholders at a specified price.

Conversion:

Preference shares may be issued with an option for the shareholder to convert them into equity shares after a specified period.

It is important to note that the specific rights of preference shareholders can vary depending on the terms of the issue of the shares and the provisions of the Companies Act, 2013. Therefore, it is essential for investors to carefully review the terms of the issue before investing in preference shares of a PLC.

Can a PLC issue convertible debentures?

Yes, a Public Limited Company (PLC) can issue convertible debentures. Convertible debentures are a form of debt instrument that can be converted into equity shares of the company at a later date, based on the terms of the issue. The process of conversion is typically triggered by certain events, such as the expiry of a specified period or the occurrence of a specific event.

Convertible debentures offer companies an opportunity to raise capital through debt financing while also providing investors with the potential to benefit from equity appreciation if the conversion option is exercised.

However, it is important to note that the terms of the issue of convertible debentures should be carefully structured, taking into account the specific needs and requirements of the company and the investors. This can involve considerations such as the conversion price, conversion ratio, and the terms and conditions governing the conversion process. The issue of convertible debentures is subject to regulatory requirements and compliances under the Companies Act, 2013 and the Securities and Exchange Board of India (SEBI) regulations.

What is the procedure for issuing debentures in a PLC?

The procedure for issuing debentures in a Public Limited Company (PLC) in India involves the following steps:

Obtain approval from the board of directors:

The first step is to obtain approval from the board of directors of the company. The board must pass a resolution approving the issue of debentures and the terms and conditions of the issue.

Conduct a shareholders’ meeting:

The company must conduct a shareholders’ meeting and pass a special resolution approving the issue of debentures. This resolution should specify the maximum amount of debentures that can be issued, the terms and conditions of the issue, and the purpose of the issue.

File a prospectus with the Registrar of Companies:

The company must file a prospectus with the Registrar of Companies (ROC) before issuing the debentures. The prospectus should contain all relevant information about the company, the terms and conditions of the issue, and the risks associated with the investment.

Obtain credit rating:

The company must obtain a credit rating from a recognized credit rating agency for the proposed debenture issue. The credit rating is important for attracting investors and ensuring that the issue is successful.

Issue debenture certificates:

The company must issue debenture certificates to the investors who subscribe to the issue. These certificates serve as evidence of ownership of the debentures.

Comply with regulatory requirements:

The issue of debentures is subject to regulatory requirements and compliances under the Companies Act, 2013, and the Securities and Exchange Board of India (SEBI) regulations. The company must ensure that it complies with all relevant regulations and obtains any necessary approvals before issuing the debentures.

It is important to note that the procedure for issuing debentures may vary depending on the specific requirements of the company and the type of debenture being issued. The company should seek professional advice and guidance to ensure that it complies with all legal and regulatory requirements.

What is the procedure for creating a charge on the assets of a PLC?

The procedure for creating a charge on the assets of a Public Limited Company (PLC) in India involves the following steps:

Obtain approval from the board of directors:

The first step is to obtain approval from the board of directors of the company. The board must pass a resolution approving the creation of the charge and the terms and conditions of the charge.

Register the charge with the Registrar of Companies (ROC):

The company must file the details of the charge with the ROC within 30 days of its creation. The details should include the nature and extent of the charge, the amount secured, and the property or assets charged.

Stamp duty payment:

The company must pay the appropriate stamp duty on the charge document as per the applicable stamp duty laws in the state where the charge is being created.

Obtain a certificate of registration:

Once the charge is registered with the ROC, the company will receive a certificate of registration of the charge.

Comply with regulatory requirements:

The creation of a charge is subject to regulatory requirements and compliances under the Companies Act, 2013, and other applicable laws. The company must ensure that it complies with all relevant regulations and obtains any necessary approvals before creating the charge.

It is important to note that the procedure for creating a charge may vary depending on the specific requirements of the company and the type of charge being created. The company should seek professional advice and guidance to ensure that it complies with all legal and regulatory requirements.

Can a PLC enter into a contract with its directors?

Yes, a Public Limited Company (PLC) can enter into a contract with its directors. However, such contracts are subject to certain restrictions and regulatory requirements to ensure that they are fair and in the best interests of the company.

Under the Companies Act, 2013, a PLC is required to obtain the approval of the board of directors and the shareholders in general meeting for any contract or arrangement with a director, where:

  1. The value of the contract or arrangement exceeds certain prescribed limits, or
  2. The director or any of his relatives has a material interest in the contract or arrangement.
  3. The company must disclose all relevant details of the contract or arrangement to the board and shareholders and obtain their approval through a special resolution passed by the shareholders in general meeting.

Additionally, the company must ensure that the terms of the contract or arrangement are fair, reasonable, and in the best interests of the company. Any contract that is not in the best interests of the company or is not approved by the board and shareholders may be challenged in court.

It is important for a PLC to comply with all legal and regulatory requirements when entering into a contract with its directors to avoid any legal disputes or penalties.

What is the procedure for holding an Annual General Meeting (AGM) of a PLC?

The procedure for holding an Annual General Meeting (AGM) of a Public Limited Company (PLC) in India is as follows:

Notice:

The company must issue a notice to all shareholders informing them of the date, time, and venue of the AGM. The notice must be sent at least 21 days before the meeting.

Agenda:

The notice must also include the agenda for the meeting, which should cover all the matters that require shareholder approval or discussion.

Quorum:

The meeting must have a quorum of shareholders present to be valid. The quorum is usually defined as a certain percentage of the total number of shareholders or share capital. If the quorum is not met, the meeting will be adjourned to a later date.

Conduct of the meeting:

The meeting will be chaired by the Chairman of the Board or a person appointed by the Board. The agenda items will be discussed and voted upon, and the minutes of the meeting will be recorded.

Voting:

Each shareholder has the right to vote on the matters discussed at the meeting. The voting can be done in person or through a proxy appointed by the shareholder. The result of the vote will be announced at the meeting.

Reporting:

The company must file a copy of the minutes of the meeting with the Registrar of Companies within 30 days of the meeting.

It is important for a PLC to comply with all legal and regulatory requirements when holding an AGM to ensure that the meeting is valid and the decisions taken are binding.

Can a PLC hold an Extraordinary General Meeting (EGM)?

Yes, a Public Limited Company (PLC) in India can hold an Extraordinary General Meeting (EGM) in addition to the Annual General Meeting (AGM). An EGM can be held at any time during the year to discuss and make decisions on matters that cannot wait until the next AGM.

The procedure for holding an EGM is similar to that of an AGM. The company must issue a notice to all shareholders informing them of the date, time, and venue of the meeting, along with the agenda. The notice must be sent at least 21 days before the meeting. The meeting must have a quorum of shareholders present to be valid, and the voting can be done in person or through a proxy appointed by the shareholder.

The decisions taken at an EGM are binding on the company and its shareholders, just like those taken at an AGM. However, since an EGM is called to discuss and decide on specific matters, it may not cover all the matters that are usually covered at an AGM.

What is the procedure for passing a special resolution in a PLC?

In a Public Limited Company (PLC) in India, a special resolution can be passed in a General Meeting (Annual General Meeting or Extraordinary General Meeting) of shareholders. A special resolution requires the support of at least 75% of the shareholders who are present in person or through a proxy at the meeting and are entitled to vote on the resolution.

The procedure for passing a special resolution in a PLC is as follows:

Notice:

The company must give at least 21 days’ notice of the General Meeting, which is to be held for the purpose of passing the special resolution. The notice must specify the resolution to be passed, and provide sufficient information to allow shareholders to make an informed decision on the matter.

Quorum:

The meeting must have a quorum of at least five members present in person or through a proxy, whichever is greater, who are entitled to vote.

Voting:

The resolution is put to a vote, and at least 75% of the shareholders present in person or through a proxy must vote in favor of the resolution for it to be passed. Shareholders can vote in person or through a proxy appointed by them.

Filing:

After the resolution has been passed, the company must file a copy of the resolution with the Registrar of Companies within 30 days. The resolution is effective from the date it is passed in the General Meeting.

It is important to note that a special resolution is a powerful tool that can be used to make significant changes to the company’s constitution or take major business decisions. Therefore, it is important to ensure that shareholders are well informed about the proposed resolution before they vote on it.

What is the procedure for appointing an auditor in a PLC?

The procedure for appointing an auditor in a PLC is as follows:

  1. The first auditor of the company is appointed by the board of directors within 30 days of the incorporation of the company.
  2. In the first AGM, the shareholders of the company must appoint an auditor to hold office until the conclusion of the next AGM.
  3. If the shareholders fail to appoint an auditor in the AGM, the board of directors must appoint an auditor within the next 30 days.
  4. The appointment of the auditor must be intimated to the Registrar of Companies (ROC) within 15 days of the appointment.
  5. The retiring auditor is eligible for re-appointment, subject to certain conditions specified in the Companies Act, 2013.
  6. In case the retiring auditor is not re-appointed, the company must within 30 days of the AGM, file with the ROC a statement indicating the reasons for not re-appointing the retiring auditor.
  7. If the shareholders or the board of directors of the company wish to remove an auditor before the expiry of their term, they must follow the procedures specified in the Companies Act, 2013.

Can a person be both a shareholder and auditor in a PLC?

No, a person cannot be both a shareholder and an auditor in a PLC. According to Section 141 of the Companies Act, 2013, an individual or a firm cannot be appointed as an auditor of a company if they hold any shares in the company or its holding, subsidiary or associate company, or if they are indebted to the company or its subsidiary or holding or associate company. This is to ensure that the auditor’s independence and impartiality are not compromised while performing their duties.

What is the procedure for removing an auditor in a PLC?

The procedure for removing an auditor in a PLC is as follows:

Convene a Board Meeting:

The Board of Directors of the company has to convene a board meeting to discuss and pass a resolution to remove the auditor.

Convene a General Meeting:

The company has to convene a general meeting and pass an ordinary resolution by a simple majority of the shareholders present at the meeting.

Inform the Registrar of Companies (ROC):

The company has to inform the ROC within 15 days of passing the resolution in the general meeting.

Appointment of a New Auditor:

The company has to appoint a new auditor within 30 days of the removal of the previous auditor. The new auditor should be qualified and eligible under the Companies Act, 2013.

Inform the ROC about the Appointment of New Auditor:

The company has to inform the ROC about the appointment of the new auditor within 15 days of the appointment.

It is important to note that the removal of an auditor should be done in accordance with the provisions of the Companies Act, 2013, and the rules and regulations framed thereunder. Any violation of the rules can attract penalties and legal action against the company and its directors.

Can a PLC merge with another company?

Yes, a PLC can merge with another company by following the provisions and procedures prescribed under the Companies Act, 2013. The process typically involves the approval of the board of directors of both the companies, obtaining approval of the shareholders and creditors, and filing necessary documents with the Registrar of Companies. The merged entity can either continue as the existing PLC or be converted into a new company, depending on the terms of the merger.

What is the procedure for liquidating a PLC?

The procedure for liquidating a PLC in India involves the following steps:

Board resolution:

The first step is to pass a board resolution approving the liquidation of the company and appointing a liquidator.

Shareholder resolution:

A special resolution needs to be passed by the shareholders of the company, approving the liquidation and appointing the liquidator.

Appointment of a liquidator:

The liquidator is appointed to take charge of the winding-up process and perform various tasks, including the realization of assets and distribution of proceeds to creditors.

Notification to Registrar of Companies:

The Registrar of Companies needs to be notified about the liquidation by filing a notice of appointment of the liquidator.

Creditors’ meeting:

A meeting of the creditors is held to ascertain the claims against the company and decide on their priority.

Sale of assets:

The liquidator is responsible for selling off the assets of the company and using the proceeds to pay off the creditors.

Settlement of claims:

Once the claims of the creditors have been settled, the remaining amount is distributed to the shareholders.

Closure:

After all the assets have been sold and the proceeds distributed, the liquidator files a final report with the Registrar of Companies, and the company is struck off from the register of companies.

It is important to note that the process of liquidation can be complex and time-consuming, and it is advisable to seek professional advice to ensure compliance with all legal and regulatory requirements.

What is the role of the liquidator in the liquidation process of a PLC?

The liquidator is responsible for managing the liquidation process of a PLC, which involves winding up the company’s affairs, selling its assets, paying off its debts and distributing any remaining assets among the shareholders. The liquidator is appointed by the shareholders or the court and is required to act in the best interests of the creditors and shareholders. The liquidator has the power to investigate the company’s affairs, recover any assets that were improperly disposed of and take legal action against the directors or other parties if necessary. The liquidator must also file various reports with the Registrar of Companies and comply with other legal requirements during the liquidation process.

Can a PLC be dissolved voluntarily?

Yes, a PLC can be dissolved voluntarily through a process known as voluntary winding up. This can happen if the shareholders of the company pass a resolution to wind up the company, or if the company is unable to pay its debts and decides to wind up voluntarily to avoid being liquidated by the court.

The process of voluntary winding up involves appointing a liquidator to manage the winding up process, notifying the Registrar of Companies and publishing a notice of the winding up in a newspaper. The liquidator is responsible for collecting and distributing the company’s assets, paying off its debts, and taking any other necessary actions to wind up the company’s affairs. Once the winding up process is complete, the company is dissolved and ceases to exist as a legal entity.

What is the procedure for striking off the name of a PLC from the register of companies?

The procedure for striking off the name of a PLC from the register of companies in India is as follows:

  1. The directors of the company must hold a board meeting and pass a resolution for striking off the name of the company from the register of companies.
  2. The company must file an application in the prescribed form with the Registrar of Companies (ROC) for striking off the name of the company from the register of companies.
  3. The application must be accompanied by the following documents:
    • A statement of accounts showing that the company has no assets and liabilities.
    • A copy of the board resolution for striking off the name of the company.
    • A copy of the special resolution passed by the shareholders for striking off the name of the company.
    • A copy of the notice of the general meeting at which the special resolution was passed.
    • An affidavit from the directors stating that the company has not conducted any business since incorporation or has ceased to carry on business and has no assets and liabilities.

4. The ROC will examine the application and, if satisfied, will publish a notice in the Official Gazette and on the ROC’s website.

5. If no objections are received within 30 days of the publication of the notice, the ROC will strike off the name of the company from the register of companies and issue a certificate of dissolution.

It is important to note that all statutory compliance, such as filing of returns and payment of taxes, must be completed before applying for striking off the name of the company.

Can a PLC be converted into a Private Limited Company?

Yes, a PLC can be converted into a Private Limited Company (PLC) by following the procedures laid down in the Companies Act, 2013. The conversion can be done by passing a special resolution with the approval of at least three-fourths of the shareholders of the PLC. The application for conversion must be filed with the Registrar of Companies along with the required documents and fees. The conversion process may involve changes to the company’s Memorandum of Association and Articles of Association, as well as alterations to its share capital and directorship structure. Once the conversion is approved by the Registrar of Companies, the company becomes a Private Limited Company.

What is the procedure for conversion of a PLC into a Private Limited Company?

The procedure for the conversion of a Public Limited Company (PLC) into a Private Limited Company (Pvt. Ltd.) in India involves the following steps:

Hold a Board meeting:

A board meeting should be held to consider the proposal for the conversion of the company from a PLC to a Pvt. Ltd. company. The board should authorize the directors or any other person to take necessary actions for the conversion.

Call for a General Meeting:

The company should then call for a general meeting of its shareholders to pass a special resolution for the conversion of the company into a Pvt. Ltd. company.

File an application with the Registrar of Companies (ROC):

Once the special resolution is passed, the company should file an application with the Registrar of Companies (ROC) in the prescribed form along with the necessary documents, such as the amended Articles of Association, the new Memorandum of Association, etc.

Obtain the approval of the ROC:

The ROC will scrutinize the application and if everything is in order, they will issue a fresh Certificate of Incorporation reflecting the new status of the company as a Pvt. Ltd. company.

Amend the MOA and AOA:

The company will then have to amend its Memorandum of Association (MOA) and Articles of Association (AOA) to reflect the changes in the company’s status from a PLC to a Pvt. Ltd. company.

Obtain new PAN and TAN:

After the conversion, the company will have to apply for a new Permanent Account Number (PAN) and Tax Deduction and Collection Account Number (TAN) with the Income Tax Department.

Intimate the changes to other authorities:

The company will have to intimate the changes to other authorities, such as the banks, creditors, vendors, and customers, etc.

It is important to note that the conversion of a PLC to a Pvt. Ltd. company may have certain implications, such as changes in the ownership structure, tax implications, compliance requirements, etc. Therefore, it is advisable to seek professional advice before proceeding with the conversion process.

Can a PLC be converted into a partnership firm?

No, a PLC cannot be converted into a partnership firm. A partnership firm is a different legal entity with a different set of regulations, and a PLC cannot be transformed into a partnership firm. However, a PLC can be dissolved and the shareholders can form a partnership firm or any other type of entity.

What is the procedure for conversion of a PLC into a partnership firm?

A Public Limited Company (PLC) cannot be directly converted into a partnership firm as they are two different legal structures. The PLC needs to be first converted into a Private Limited Company and then into a partnership firm, if desired.

The procedure for the conversion of a PLC into a Private Limited Company is as follows:

  1. Hold a board meeting and pass a resolution for conversion.
  2. Conduct a general meeting and pass a special resolution for conversion.
  3. File Form MGT-14 with the Registrar of Companies (ROC) within 30 days of passing the special resolution.
  4. Obtain a new certificate of incorporation from the ROC.
  5. Update the memorandum and articles of association of the company to reflect the new structure and file the same with the ROC.

After the conversion of the PLC into a Private Limited Company, the company can be converted into a partnership firm by following the relevant laws and regulations for setting up a partnership firm.

Can a PLC be converted into a sole proprietorship?

No, a PLC cannot be converted into a sole proprietorship. A sole proprietorship is a type of business structure where a single person owns and operates the business, while a PLC is a type of business structure where the ownership is divided among multiple shareholders. The conversion from a PLC to a sole proprietorship would involve a complete change in the ownership structure, which is not possible. However, a PLC can be converted into a private limited company or a partnership firm, subject to compliance with the relevant laws and regulations.

What is the procedure for conversion of a PLC into a sole proprietorship?

A PLC cannot be converted into a sole proprietorship because a sole proprietorship is not a separate legal entity. A sole proprietorship is a business owned and operated by a single individual, who is personally liable for all the debts and obligations of the business.

If the shareholders of a PLC wish to wind up the company and continue the business as a sole proprietorship, they would need to follow the process for liquidating the PLC and then start a new business as a sole proprietorship. This would involve obtaining any necessary licenses and permits, registering the business with the appropriate authorities, and complying with any other legal requirements for operating a sole proprietorship.

Can a PLC be converted into a One Person Company (OPC)?

No, a Public Limited Company (PLC) cannot be directly converted into a One Person Company (OPC) as OPC is a separate legal entity and has different requirements for incorporation. To convert a PLC into an OPC, the PLC must first be converted into a Private Limited Company (PLC) and then the Private Limited Company can be converted into an OPC, subject to fulfilling the eligibility criteria and requirements specified under the Companies Act, 2013 and rules made thereunder.

The conversion process involves various steps such as obtaining consent from shareholders, obtaining approval from regulatory authorities, amending the memorandum and articles of association, and complying with other legal requirements. It is advisable to consult a professional company secretary or a legal expert for guidance on the conversion process.

What is the procedure for conversion of a PLC into a OPC?

A Public Limited Company (PLC) can be converted into a One Person Company (OPC) by following the procedure prescribed in the Companies Act, 2013 and the Companies (Incorporation) Rules, 2014. The procedure involves obtaining the approval of the shareholders and creditors of the PLC, filing of the necessary documents with the Registrar of Companies (ROC), and obtaining a fresh certificate of incorporation as an OPC from the ROC.
The steps involved in the conversion of a PLC into an OPC are as follows:

Hold a Board Meeting:

The Board of Directors of the PLC must convene a meeting and pass a resolution to authorize the conversion of the company into an OPC.

Obtain consent of the Shareholders:

The shareholders of the PLC must pass a special resolution approving the conversion of the company into an OPC. The special resolution must be passed by a three-fourths majority of the shareholders present in person or by proxy and entitled to vote.

Obtain consent of the Creditors:

The company must obtain the consent of its creditors by sending a notice of the proposed conversion to all the creditors of the company. The creditors must be given a period of 21 days to object to the proposed conversion. If no objection is received from the creditors within the stipulated time period, it will be deemed that they have given their consent for the conversion.

File the necessary documents:

The company must file the necessary documents with the Registrar of Companies (ROC) within 30 days of obtaining the consent of the shareholders and creditors. The documents to be filed include the following:

  1. Form INC-5
  2. Special Resolution passed by the shareholders
  3. NOC from creditors
  4. List of members and creditors
  5. Declaration by the directors
  6. Affidavit from the directors

Obtain a new Certificate of Incorporation:

Upon verification of the documents, the ROC will issue a new certificate of incorporation with a new Corporate Identification Number (CIN) indicating the conversion of the PLC into an OPC.

Update other registrations:

The company must update its PAN, TAN, and GST registrations with the new CIN obtained from the ROC.

It is important to note that the conversion of a PLC into an OPC is subject to certain conditions, such as the paid-up share capital of the company must not exceed Rs. 50 lakhs and the turnover of the company must not exceed Rs. 2 crores.

What are the compliance requirements for a PLC?

A PLC is required to comply with various statutory and regulatory requirements in India. The compliance requirements for a PLC are as follows:

Appointment of directors:

The PLC must have a minimum of three directors, and a maximum of fifteen directors, and must appoint them within 30 days of incorporation.

Holding of board meetings:

The PLC must hold a minimum of four board meetings in a calendar year, with a gap of not more than 120 days between two meetings.

Holding of AGM:

The PLC must hold an AGM within six months of the end of the financial year, and the gap between two AGMs should not exceed fifteen months.

Filing of annual returns:

The PLC is required to file its annual returns with the Registrar of Companies (ROC) within sixty days from the date of AGM.

Filing of financial statements:

The PLC is required to file its financial statements with the ROC within thirty days from the date of AGM.

Maintenance of statutory registers:

The PLC is required to maintain various statutory registers, such as register of members, register of directors, register of charges, etc.

Payment of taxes:

The PLC is required to pay various taxes such as income tax, goods and services tax (GST), etc.

Compliance with other laws:

The PLC must comply with various other laws such as the Companies Act, 2013, Securities and Exchange Board of India (SEBI) regulations, Reserve Bank of India (RBI) regulations, etc.

Non-compliance with these requirements can result in penalties, fines, and legal action. Therefore, it is essential for a PLC to ensure timely compliance with all statutory and regulatory requirements.

What are the penalties for non-compliance by a PLC?

Non-compliance by a PLC with the legal requirements and regulations can result in penalties and sanctions. The penalties depend on the nature and severity of the non-compliance. Some of the penalties for non-compliance by a PLC are:

Fines:

The Registrar of Companies can impose fines on a PLC for various violations of the Companies Act, such as late filing of documents, failure to hold Annual General Meetings, or failure to maintain statutory registers.

Legal action:

The Registrar of Companies can take legal action against a PLC for non-compliance with the Companies Act. The legal action may include prosecution, winding up, or striking off the name of the company from the register of companies.

Disqualification:

Directors who are found to be involved in non-compliance by the PLC can be disqualified from holding directorships in other companies.

Imprisonment:

In certain cases, non-compliance with the Companies Act can lead to imprisonment for the directors or officers of the PLC.

It is important for a PLC to ensure that it complies with all the legal requirements and regulations to avoid penalties and sanctions.

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