Public company
Also called: Public limited company, Deemed public company
Under Section 2(71) of the Companies Act, 2013, a company that is not a private company and has the prescribed minimum paid-up capital, including a subsidiary of a non private company.
Explained
Section 2(71) of the Companies Act, 2013 defines a public company as a company which is not a private company and which has such minimum paid-up share capital as may be prescribed. The proviso adds that a company which is a subsidiary of a company, not being a private company, shall be deemed to be a public company for the purposes of the Act, even where the subsidiary continues to be a private company in its articles.
The contrast is with Section 2(68). A private company must, by its articles, restrict the right to transfer its shares, limit its members to two hundred (except in a One Person Company), and prohibit any invitation to the public to subscribe for its securities. A public company has none of these restrictions, so its shares are freely transferable and it may raise capital from the public through a prospectus.
Several numbers follow from the status. Under Section 3(1) a public company may be formed by seven or more persons, against two for a private company and one for a One Person Company. Under Section 149(1) a public company must have at least three directors, against two for a private company and one for a One Person Company, and a maximum of fifteen unless a special resolution allows more. Under Section 3A, if the members of a public company fall below seven and it carries on business for more than six months while so reduced, every member who knows of it and remains a member after those six months is severally liable for the debts contracted during that period.
Conversion is governed by Section 14. A company may alter its articles by special resolution to convert from private to public or public to private. A private company whose articles drop the private company restrictions ceases to be private from the date of alteration. Conversion of a public company into a private company is valid only when approved by an order of the Central Government. Examiners test the deemed public company proviso, the seven member rule, Section 3A and the approval authority under Section 14.
What the law says
(71) “public company” means a company which—
(a) is not a private company; [and]
(b) has a minimum paid-up share capital *** as may be prescribed:
Sections 2(71) and 2(68): public and private company
(a) seven or more persons, where the company to be formed is to be a public company;
(b) two or more persons, where the company to be formed is to be a private company; or
(c) one person, where the company to be formed is to be One Person Company that is to say, a private company,
Seven persons to form a public company
[-If at any time the number of members of a company is reduced, in the case of a public company, below seven, in the case of a private company, below two, and the company carries on business for more than six months while the number of members is so reduced, every person who is a member of the company during the time that it so carries on business after those six months and is cognisant of the fact that it is carrying on business with less than seven members or two members, as the case may be, shall be severally liable for the payment of the whole debts of the company contracted during that time, and may be severally sued therefor.]
Liability when members fall below seven
(a) a private company into a public company; or
(b) a public company into a private company:
Provided that where a company being a private company alters its articles in such a manner that they no longer include the restrictions and limitations which are required to be included in the articles of a private company under this Act, the company shall, as from the date of such alteration, cease to be a private company:
Conversion between public and private
(a) a minimum number of three directors in the case of a public company, two directors in the case of a private company, and one director in the case of a One Person Company; and
(b) a maximum of fifteen directors:
Provided that a company may appoint more than fifteen directors after passing a special resolution:
Minimum three directors for a public company
For the exam
- Section 2(71): not a private company and has the prescribed minimum paid-up capital.
- A subsidiary of a public company is deemed public even if its articles say private.
- Minimum seven members to form (Section 3(1)) and three directors (Section 149(1)).
- Members below seven for over six months: knowing members severally liable for debts (Section 3A).
- Public to private conversion needs approval by order of the Central Government (Section 14).
42 questions in the Law Maker question bank use this term. Practise Company Law questions
Related terms
- Private companyA company whose articles restrict share transfer, limit members to two hundred (except a One Person Company) and bar public invitation to subscribe for its securities. Section 2(68), Companies Act, 2013.
- One Person CompanyUnder Section 2(62) of the Companies Act, 2013, a company which has only one person as a member. It is a form of private company formed under Section 3(1)(c).
- Small companyUnder Section 2(85) of the Companies Act, 2013, a company other than a public company whose paid-up capital and turnover are both within the prescribed limits.
- ProspectusUnder Section 2(70) of the Companies Act, 2013, any document described or issued as a prospectus, including red herring and shelf prospectuses, or any notice, circular or advertisement inviting public offers for securities.
- Government companyA company in which not less than fifty-one per cent of the paid-up share capital is held by the Central Government, one or more State Governments, or both, including a subsidiary of such a company.
- Independent directorA director, other than a managing, whole-time or nominee director, who meets the independence criteria in Section 149(6) of the Companies Act, 2013 (Section 2(47)).
Further reading
Checked 6 November 2026. Statutory text is quoted from the Bare Acts library, taken from India Code. See the full glossary.