A public limited company ('PLC') is a company that is able to offer its shares to the public. They don't have to offer those shares to the public, but they can.
Well over 95% of limited companies in the UK are "private" – it is by far the most common form of limited company.
However, you also need to know about "public" limited companies.
There are some specific requirements for a PLC which must be met:
- The minimum number of shareholders must be two (a private limited company only needs one shareholder)
- Accounts must be filed within 6 months of the year end (the limit is 9 months for a private company)
- The Company Secretary must be a qualified person (in a private company the secretary does not need to be qualified)
- The minimum number of Directors is two (just one needed for a private company)
The main advantages of a being public limited company are:
- Better access to capital – i.e. raising share capital from existing and new investors
- Liquidity – shareholders are able to buy and sell their shares (if they are quoted on a stock exchange)
- Value of shares – the value of the firm is shown by the market capitalisation (based on the share price)
- The opportunity to more easily make acquisitions – e.g. by offering shares to the shareholders of the target firm
- To give a company a more prestigious profile
As always there are some disadvantages to being a PLC (as opposed to remaining as a private company). The main downsides are:
- Once listed on a stock exchange, the company is likely to have a much larger number of external shareholders, to whom company directors will be accountable
- Financial markets will govern the value of the company through the trading of the company's shares, and will represent the market's view of the company's performance over time
- Greater public scrutiny of the company's financial performance and actions
Share capital restrictions
As well as the requirement to issue shares with a nominal value of at least £50,000 and for a quarter of this nominal value and the whole of any premium to be paid up, various other rules also apply to how a public limited company must manage its share capital:
- Pre-emption rights can only be excluded for a specified period, often the time between successive annual general meetings, rather than indefinitely.
- The opportunity to pay dividends is more restricted for public companies, which have to ensure their net assets will not fall below the level of called-up share capital and undistributable reserves as a result of a dividend.
- While a public limited company can purchase its own shares or redeem shares out of distributable profits, unlike a private company it cannot do so out of assets representing the company’s capital and non-distributable reserves.
- Public companies may not reduce the level of their share capital via a solvency statement, but will instead need to apply to the High Court to do so. For example, they might do so in order to write off accumulated balance sheet losses.
- Public limited companies cannot give financial assistance for the acquisition of their shares.
- A public limited company is required to convene a general meeting following a serious loss of capital.
