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What is a Public Limited Company and Should You Form One?

What is a Public Limited Company and Should You Form One?

Becoming a Public Limited Company, or PLC, can be an advantageous move for a business. In this blog post we will look at what a PLC is, how to set one up and whether it is the right choice for your business.

What is A Public Limited Company (PLC)?

As a business, a PLC is able to offer its shares to the public. It is not compulsory to offer shares to the public, but it is an option. A PLC's stock can be acquired by anyone, either privately or through trades on the stock market. All public limited companies' names end in "PLC" and some examples of well-known PLCs include BP PLC, Burberry Group PLC, Rolls-Royce Holdings PLC and Marks and Spencer PLC.

While it is not compulsory for a PLC to offer its shares to the public, many do. Their shares are usually traded on either the London Stock Exchange or the Alternative Investments Market (AIM).

What Requirements Do PLCs Need To Meet?

In order to become a PLC, some requirements must be met. These include:

  • Having a minimum of two shareholders and directors, both aged 16 or over.
  • Having accounts filed within 6 months of the year end; these are more strictly regulated than a private company. PLCs must publish their true financial health.
  • Having a qualified company secretary that has the necessary knowledge and ability to fulfil business functions.
  • Issuing shares to the public to a value of at least £50,000, or the equivalent in euros before it can trade.
  • Being registered with Companies House. Accounts need to be filled with Companies House once a year - the accounts must be audited unless the company is exempt.

Management And Raising Finance

As PLCs are the only type of business that can raise money by selling shares to the general public, there are certain guidelines that must be adhered to and understood. Some points on finance for PLCs to add some clarity are:

  • Shareholders can be individuals or other companies.
  • Shares can be traded on the stock exchange, but do not have to be.
  • Finance can also be raised through loans and retained profits.
  • Directors may have to give personal guarantees of loans to the company.

What Are The Benefits Of Being A Public Limited Company?

The main advantages of a being public limited company are:

  • A more prestigious business profile.
  • Better access to capital as you are able to raise share capital from existing and new investors.
  • Liquidity – shareholders can buy and sell their shares.
  • The opportunity to make acquisitions much more easily – e.g. by offering shares to the shareholders of a target firm.

Are There Any Downsides To Becoming A PLC?

Over 95% of limited companies in the UK are ‘private’ as opposed to ‘public’. So, many would argue that there are some potential negatives that may make you want to remain as a private company. These include:

  • 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.
  • You may face greater public scrutiny as the company’s financial performance and actions are publicly analysed.
  • Company directors will be accountable for a larger number of shareholders if the PLC is listed on a stock exchange.

These downsides should not be seen as reasons to put you off; many companies thrive as PLCs and these are just pointers worth noting in the grand scheme of things.

How Can Paramount Help?

If you are trying to decide whether becoming a public limited company is the right move for your business, Paramount can help. Get in contact with our friendly team on 0800 0198 698 or find out how Paramount can help you to form a PLC.

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