Public Limited Company (PLC)

Public Limited Company (PLC)

A public limited company is a company which is authorized to sell its shares to the public in order to raise funds for commercial use. All public limited companies name ends with “PLC”. It is not mandatory for a public limited company to sell its shares to the public as their shares are generally listed on either London stock exchange or alternative investment market. Public limited company is considered more prestigious than a private limited company as it is rarely formed and strictly regulated.

A public limited company is owned by shareholders and run by its directors. Directors of a public limited company enjoy the benefit of limited liability.

Minimum Requirements to set up a Public Limited Company

• Minimum 2 shareholders
• Minimum £5000 value of shares should be issued or prescribed to the public before trading.
• It must be registered with company’s house.
• It must have a qualified secretary
• It must have at least 2 directors in which one must be an individual having 16 years of age to become eligible for the post of director.

Management & Raising Finance

Public limited company is only type of business structure which is authorized to sell its shares in order to raise funds from the general public.

1. Shareholder can be an individual or a company
2. Shares may or may not be traded on the stock exchange
3. Directors of the company may be asked to give loan guarantees personally to the company
4. Management decisions are usually taken by board of directors.
5. Finance can also be raised by the company through loans & retained profits.

Records & Accounts

A public limited company –

• Should send tax returns to companies house every year
• Should submit audited accounts to companies house once a year.

Any change in structure & management of the business must be notified by the director to company’s house.

Profits

Profits are generally distributed in the form of dividends to the shareholders except the profits which are retained by the company as working capital.

Tax & National Insurance

If a public limited company has a taxable income or profit, it must be disclose to HMRC. Due corporation tax must be paid and company tax returns should be submitted by the company to HMRC on time. A public limited company must comply with HMRC’s requirements for PAYE for employers & VAT.

Liability

A public limited company directors enjoys the benefit of limited liability and are not responsible for paying company debts unless in case of any guarantee given by the director at the time of bank loan.

Benefits of Public Limited Company

• The first and the foremost benefit of a public limited company is its ability to raise funds by selling its shares to the public. If the shares are listed on stock exchange, it might be possible that it attracts investment from mutual funds, hedge funds and other institutional traders. The capital raised by a public limited company is on a much large scale in comparison to a private limited company.
• It diversifies the risk of company ownership when shares are distributed among large number of shareholders.
• Public limited company provides many growth as well as expanding opportunities by –
  1. Pursuing new products, new projects & new markets.
  2. Making acquisitions
  3. Paying off existing debt
  4. Making capital expenditure in order to support & enhance the business
  5. Funding research & development
  6. Growing organically
• It helps improves your business profile and makes it a prestigious one. The most important thing about a company is what is its perception in the eyes of customers, suppliers and employees? A public limited company considered as a powerful establishment and affects the behavior of customers, suppliers & employees. It receives more attention of investment professionals & media too. More the people know about the company, more influence they will about the products & services of the company which results in increased sales.
• The shares of a public limited company can be more easily transferable in comparison to private limited company. There is no restriction on the shares transferability in a public limited companies that you will find mostly in private limited companies. It is easy to deal with the following situations in a public limited company –
  1. Death of a shareholder
  2. Allowing transmission of shares with the terms of any will.
• Public limited company offers you various finance opportunities and finds itself in a favorable position in terms of finance. There are various sources of finance available which improves the creditworthiness of a public limited company. Even bank & financial institutions are willing to give their support to public limited company specifically to those who are listed on stock exchange. Due to its favorable position, public limited company can also negotiate the interest rates and repayment terms of loan.
• After going public, Founders of a public limited company can easily exit the business at any point of time in future due to enhancement of options. Higher transferability of shares, increased business visibility & the performance may increase the chances of bid interest from prospective buyers of business known as potential suitors.