A public limited company is a voluntary association of members which is incorporated and, therefore has a separate legal existence and the liability of whose members is limited. A company must have a minimum of seven members but there is no limit as regards the maximum number. The shares of a company are freely transferable and that too without the prior consent of other shareholders or without subsequent notice to the company. The shareholders of a company do not have the right to participate in the day-to-day management of the business of a company. This ensures separation of ownership from management. The power of decision making in a company is vested in the Board of Directors, and all policy decisions are taken at the Board level by the majority rule. This ensures a unity of direction in management.
The major advantage of Public Limited company:
- Better access to capital: i.e. raising share capital from existing and new investors
- Transferability: Shares of the company are freely transferable providing more liquidity to its shareholders .
- Large Capital: These businesses can raise large capital sum as there is no limit to the number of shareholders.
- Limited liability: It means that if the company experience financial distress because of normal business activity, the personal assets of shareholders will not be at risk of being seized by creditors.
- Separate legal entity: A company is a legal entity and a juristic person established under the Act. Therefore a company form of organization has wide legal capacity and can own property and also incur debts. The members (Shareholders/Directors) of a company have no liability to the creditors of a company for such debts.