Table of Contents
A Public Limited Company (PLC) is one of the company structures in the UK and is often referred to as a public company as it may offer to sell its shares to the people, that is, the public. This type of structure is based on exchanges and trading shares where shares can be openly bought or sold by companies, individuals, mutual funds, etc.
PLC Company in the UK
It is a publicly-traded corporation that offers protection against liabilities and debt. Unlike other company structures such as partnerships and sole traders, it acts as a separate entity to the owners. The buyers of the shares that have been offered to the public cannot be held responsible for any company losses over the money they paid for the shares.
They also make their financial reports public to provide all the information to their future shareholders that are required before an investment. It is a business managed by the owners but owned by the shareholders.
A PLC is listed on the stock exchange market but must be more open about its details than a private company. All companies listed on the London Stock Exchange are PLCs, but all the PLCs are not listed on the stock exchange.
Just as the US uses Corporation or Inc., UK companies use the abbreviation PLC at the end of the company’s name to communicate to the investors that it is a public company. Famous UK brands like Shell and Burberry are PLCs. The formal name of Burberry is Burberry Group PLC.
Requirements to Become a PLC
There are a few points that must be complied with for a company to become a PLC:
- A registered office in the U.K.
- Company name ending with a PLC designation
- Minimum issued share capital of £50,000 with 25% paid up
- It must have two directors.
- At Least one shareholder
- Appointment of a qualified Company Secretary
Here, the shareholders and directors can be of any nationality; they need not be from the UK.
Commencement of Trading
A PLC cannot begin its business or commence trading unless a certificate is issued by the Companies House stating that this company has a minimum shared capital of £50,000. Out of this £50,000, at least £12,500 must be paid to the Registrar of Companies to issue the Certificate for Commencement of Trading.
This certificate needs to be issued before the company begins business or trading unless a Trading Certificate has been issued from the Companies House. This certificate becomes proof that a company is entitled to carry out business like trading or borrowing.
Pros and Cons of Having a PLC
- Access to more capital: Being a PLC can raise more capital due to the issue of public shares. Also, the listing of shares on the Public Stock Exchange attracts more funding from professional traders, individual investors, hedge funds, and mutual funds. All this leads to elevated access to capital more than any private limited company.
- An increase in liquidity: Liquidity is an option for investors to trade their shares. By becoming a PLC, shareholders are provided liquidity as it creates a market for its shares in public, giving them a market value making it eligible to trade.
- Making acquisitions and gaining new opportunities: Due to a large capital base, the PLCs witness an increase in status and gain prestige and positive publicity. This publicity can help in brand awareness, resulting in more media attention attracting new shareholders, and thus acquiring new opportunities and a chance to make acquisitions.
- Sense of transparency: Since the records are public, they improve customers’ perception. This also helps in enhanced status in the eyes of customers and suppliers.
- Employee Benefits: A PLC can make use of share plans for employees. For example, issuing shares to employees based on their performance can also give tax advantages as capital gain taxes are lower than personal income ones.
- Increased Regulation: There is a lot of scrutiny and regulation for a PLC in the UK. They have to report all accounting data to the shareholders with high transparency and even hold their yearly general meeting open to all the shareholders.
- Increase in Vulnerability: A PLC is more vulnerable to takeover bids from rivals and pressure from the shareholders. More number shareholders result in more distribution of power.
- Increase in Volatility: Since the value of a PLC is dependent on the financial market, it can become more volatile.
- Dilution in a unified company vision: Shares of a PLC can be bought by anyone and hence result in dilution of the company’s vision.
- Tax deadlines: Tax deadlines for PLCs are shorter than for private companies.
- Two directors: Two directors are a must in a PLC, but only one is required in a private limited company. Also, a PLC must assign a qualified company secretary, which is not the case in a private company.
Conversion of a Private Company to a Public Limited Company
Some businesses may choose to remain private for their whole business lifespan. But some well-established companies eventually decide to become public as they have a strong management structure and assess all the risks before the conversion.
This process involves passing a special resolution by the shareholders, sending necessary documents and forms to the Companies House, and a registration fee of £20.
If you wish to convert your private limited company to a PLC on the same day, the registration fee is £50.
Converting from a private limited company to a PLC brings a lot of changes, mainly in the administration and ways of trading or business structures.
Conversion of a PLC to a Private Limited Company
If a private company converts to a PLC but is not happy with its decision anymore, it can become a private company again. This decision may arise because the company cannot deal with the disadvantages of a PLC; that is, the cons outweigh the pros of a PLC.
This process requires filling out a form and submitting it to the Companies House.