# Section 2(71) — Public Company

## Statutory Definition

> '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:

> Provided 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 this Act even where such subsidiary company continues to be a private company in its articles.

## Essential Features

Feature	Description
Negative definition	Defined as a company that is NOT a private company
Minimum members	7 (Section 3)
Maximum members	No limit
Minimum paid-up capital	Originally ₹5 lakh; removed by Companies (Amendment) Act, 2015 — currently NIL
Free transferability of shares	Yes, shares are freely transferable
Public invitation	Permitted (can issue prospectus, do IPO)
Naming	Name must end with the word 'Limited'

## The 'Deemed Public Company' Proviso

This is the most important and most tested concept:

> A subsidiary of a public company is treated as a public company, even if its own articles say it is a 'private company'.

### Why?

A private company is given various exemptions/relaxations under the Act. If a public company can simply create private subsidiaries to escape those provisions, the purpose of strict public-company regulation would be defeated. Hence, such subsidiaries are 'deemed' public companies.

### Practical Effect:

The deemed public subsidiary must comply with the stricter provisions applicable to public companies — even though its name continues to end with 'Private Limited' and its Articles still contain the three private-company restrictions.

## Public Company vs Private Company

Particulars	Private Company	Public Company
Minimum members	2 (1 for OPC)	7
Maximum members	200	Unlimited
Transfer of shares	Restricted by AoA	Freely transferable
Public subscription	Prohibited	Allowed
Name ends with	'Private Limited'	'Limited'
Minimum paid-up capital	Nil	Nil

Worked example

### Example 1

Example 1 — Deemed Public Company: ABC Ltd. is a public company. It incorporates XYZ Pvt. Ltd. as its wholly-owned subsidiary, with Articles containing all 3 private-company restrictions. Status of XYZ? By virtue of the proviso to Section 2(71), XYZ Pvt. Ltd. is DEEMED to be a public company for the purposes of the Act, even though its name continues to end with 'Private Limited' and its Articles still classify it as private. XYZ must comply with provisions applicable to public companies.

### Example 2

Example 2 — Minimum members: PQR Ltd. is a public company with only 6 shareholders. This breaches the minimum-7 requirement. If continued for more than 6 months, every member aware of this becomes severally liable for the company's debts (Section 3A).

⚠️ Common exam mistakes

Stating that a public company requires a minimum paid-up capital of ₹5 lakh — this was abolished in 2015.
Forgetting the 'deemed public company' rule for subsidiaries of public companies — it applies even when the subsidiary's articles classify it as private.
Confusing 'public company' with 'listed company' — every listed company is public, but not every public company is listed.
Believing a public company can have its shares' transferability restricted by AoA — restriction is a feature of private companies only.

Bare-Act text Section 2(71) · Companies Act, 2013 · click to expand

Section 2(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: Provided 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 this Act even where such subsidiary company continues to be a private company in its articles.

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Section 2(71) Public Company

Worked example

⚠️ Common exam mistakes