This blog discusses what a Public Limited Company is and how it works. It lists out the numerous advantages and disadvantages of a public limited company. It also states the difference between a public and a private limited company
A Public Limited Company also referred to as a PLC, is a company structure that is only available for business owners in the United Kingdom. It is unlike other structures of businesses such as sole proprietorships or traders or a private limited companies where the company is separate from the owners, which protects the owners from debts and liabilities.
About a Public Limited Company
A PLC or a Public Limited Company is a public company in the United Kingdom. A PLC or a Public Limited Company is similar to the publicly traded companies in the United States of America that have the corporation or Inc. designation. It is compulsory to use the abbreviation PLC after the company’s name. It is also mandatory to inform anyone dealing with the company, including investors, that it is a Public Limited Company. Every company that is on the list on London Stock Exchange are Public Limited company.
They are all owned by shareholders and managed by directors. It also offers its shares to the general public. PLCs are required to have easily accessible public financial reports and more admin for tax since all the public shareholders must be aware of the company’s financial situation before they decide to invest.
Several of the popular brands in the United Kingdom, such as Shell and Burberry, have the PLC suffix, which indicates that they are Public Limited Companies.
Requirements of a Public Limited Company
A PLC is a company in the United Kingdom with shares that the general public can buy. Anyone who buys this company’s shares has limited liability. Limited liability means that if there is a loss, the shareholders will only lose the money they invested, and their personal assets are safe.
The company law in the United Kingdom states that a PLC must have the suffix PLC after the company’s name and should have a £50,000 share capital at least. Similar to the traded companies in the United States of America, PLCs also offer different types of shares like cumulative preference and ordinary shares. The ordinary shares of a Public Limited Company are just like the standard stock provided by corporations in the United States of America.
Cumulative preference shares are more like the preferred stock in the United States of America. Other crucial requirements that a PLC must meet are appointing directors, completing the registration requirements, and offering shares.
Pros and Cons of a PLC
Companies decide to become a PLC since the advantages of this structure greatly outweigh the disadvantages. Even though you get numerous benefits by changing into a Public Limited Company, this change requires major changes to the existing managing structure.
Pros of a Public Limited Company
- The business can profit and increase its capital through share sales.
- The company can use this increased capital due to share sales to pay for new opportunities and expansion.
- This capital can be used to pay up any company debts.
- The stock listings on the market boost the company’s prestige and reputation.
- This leads to publicity which enhances the brand’s awareness.
- Since a PLC has public records, it attracts potential business partners.
- This sense of transparency can greatly enhance the brand’s perception of customers.
Cons of Public Limited Company
- This company structure is far more regulated for Company House and taxes.
- A PLC requires two directors whereas an Ltd only needs one.
- A secretary at an Ltd company does not need to be fully qualified. However, a secretary at a PLC needs to have all the necessary qualifications.
- Public Limited Companies have a shorter deadline for HMRC tax.
- PLCs are more vulnerable since there are numerous shareholders, which means the power is distributed.
- Anyone purchasing can become a shareholder, significantly decreasing a unified company vision.
- All PLCs are required to have a general meeting annually.
Should all Companies Become PLCs Eventually?
Businesses do not need to become public limited companies. Most companies are private for their entire lifespan. The companies that do decide to go public are often already well-established with a strong management structure. They are usually so well-placed that they can withstand the potential risks of changing to a Public Limited Company.
A company that was originally a PLC can choose to reverse its decision to go public. They must complete the necessary forms and submit them to the Companies House. Companies usually revert to being a private company when the benefits of becoming a PLC outweigh the pros.
Difference Between a Public Limited Company and a Private Limited Company
If you want to become a public company, you must at least have seven members. However, a private limited company can be started with just two members. It is compulsory to hold a general meeting of members yearly for a public limited company.
At the same time, a private limited company does not have such compulsions. A PLC needs a certificate of commencement after incorporation to start its operation.
In comparison, a private limited company can begin its operations immediately after its incorporation. The scope for a private limited company is limited since there are fewer restrictions and fewer members. In contrast, the scope of a public limited company is quite vast. This is due to several reasons, such as a PLC must follow many legal restrictions and can increase capital from the general public. PLCs must have a company secretary. However, a private limited company may choose not to hire a secretary.
A PLC is the United Kingdom equivalent of a corp. or Inc. company that is from the United States of America. Public Limited Companies are located in the United Kingdom and are publicly traded. Numerous top-rated companies in the United Kingdom are PLCs and have the PLC designation in the suffix, such as the famous drugmaker AstraZeneca plc and the consumer goods company Unilever plc.
There are several requirements you need to fulfill to become a public limited company, as stated in the article above. Any company can apply to become a PLC quite easily. They need to determine if their company’s management system can withstand the disadvantages of going public. If you need more information and guidance regarding the same, make sure you are relying on Vakilsearch.