A Private Limited Company (PLC) is a voluntary association registered under the Companies Act, 2013 or any other previous company law. A PLC is the best option if you are planning it bigger. Earlier, required minimum paid up capital was 1 Lac for formation of a PLC, but, as per the 2015 amendment in Companies Act, 2013 no minimum paid up capital is required. Now it is more convenient for a business man to start a private limited Company. Advantages of a PLC is discussed as follows:
A member is not personally liable for the debt and liabilities of the company. The Liability of a member is only limited to the share subscribed by him at the time of winding up.
Separate Legal entity
A company is a juristic person in the eyes of law. It can acquire, hold, and alienate property in its own name. It is an artificial separate legal entity. It can sue and can be sued in its own name. A company can enter into a contract in its own name through its members. Earlier, a company’s common seal was considered as its signature, but after the 2015 amendment, common seal is not mandatory but optional.
Conducts business through natural person
A company, though being an artificial person, conducts its business through natural person. The affairs of a company are managed by the Directors, Top level managers, MD and the employees of the Company. Therefore, in case of fraud, misrepresentation in documents, the person responsible for it is liable. For instance, a promoter is liable for misrepresentation in the prospectus. It is called lifting of corporate veil. Thus, despite the fact that it is a separate legal entity the person liable for the fraud, misrepresentation, mistake is held liable.
Unlike a partnership, a company does not come to an end even if the members die, and becomes insolvent. It continues to survive unless dissolved by legally or voluntarily.
A PLC can obtain funds by issuing shares, debentures, stock. A company can issue secured as well as unsecured debentures. It can also accept deposits from public. It is easier to get loans from financial institutions.
Loan to Directors
- Now a PLC can advance loan or security/ guarantee to its Directors provided that;
- Such company should not have body corporate as shareholder and;
- It should not have borrowed money from any financial institution or bank or any other body corporate, exceeding twice its paid up capital or 50 Cr whichever is less and;
- No repayment default by such Company.
Conversion of an LLP into PLC
If you are planning for long run business and want to build up huge capital resource, want to conduct business at large-scale, in such case, a small enterprise, an LLP can be easily converted into a PLC. A PLC can also be converted into a Public Limited Company as well and vice versa.
Transfer of share-
Shareholders are the owners of the company. A shareholder can transfer its share subject to the alteration in AOA.