Guide to Public Limited Companies (PLC)

• A PLC must have a minimum issued share capital of £50,000, with at least 25% (£12,500) paid up before the company can commence business.
• Unlike an LTD, a PLC is legally required to have a company secretary.
• A PLC must have at least two directors, whereas an LTD only needs one.

What is a public limited company (PLC) in the UK?

A PLC is a business structure in which shareholders have limited liability, meaning they are only responsible for the company's debts up to the amount they invested. PLC shares are available for purchase by the general public through the London Stock Exchange. While a PLC can choose not to offer shares to the public, it retains the option to do so when needed.

Although a PLC structure has benefits, they are less common in the UK, with over 95% of limited corporations being private limited companies. Here are some differences between PLCs and private companies:

• Shareholders: A PLC requires a minimum of two shareholders, whereas a private entity needs only one.
• Directors: A PLC needs to have at least 2 directors, while a private venture requires only one.
• Company accounts filing: Public entities must submit their annual accounts to HMRC within six months of the end of the financial year, while limited liabilities companies have up to nine months.
• Company Secretary: A PLC must appoint a fully qualified Company Secretary, whereas a private corporate secretary does not need specific qualifications.

These requirements ensure that PLCs meet higher transparency and governance standards than private corporations.

What are public limited company advantages and disadvantages?

At some point, a business may choose to go public due to the various advantages a plc structure offers. However, it also comes with certain disadvantages, as discussed below.

Public limited company advantages

One key advantage of a listed company is its capacity to raise capital from retail or institutional investors through its sales of shares to the public. With such an expansive capital base, a well-managed PLC can access unlimited capital to pursue its objectives.

Other advantages include –

Limited liability and brand name protection

• Once your company is registered as a PLC, your company name is legally protected. This means no one else can use your company name for trading purposes. Unlike sole traders and limited liability partnerships (LLPs), which rely on trademark legislation for name protection, a PLC ensures that your company name remains your exclusive legal property.
• A PLC provides a separate legal identity for your business, distinct from its management and shareholders. This separation is crucial because it offers protection through limited responsibility. If your business faces financial difficulties, the shareholders' liability is limited to the amount unpaid on their shares. Restricted liability is a crucial benefit of incorporation, safeguarding personal assets from business debts and failures.
• A PLC offers a strong sense of continuity for your business. The company remains operational regardless of directors, management, or employee changes. The business will continue to exist until it is formally dissolved through a winding-up process or liquidation ordered by the courts or the Registrar of Companies. This ensures that the company’s activities and obligations can continue seamlessly, providing stability and longevity.

See also: What is a limited company?

Share capital benefits

• In addition to raising shares through the stock exchange, plc directors can also raise funds through other instruments such as bonds and debentures.
• PLC shares are publicly traded on the stock market, providing a platform for continuous trading. This means anyone can buy or sell their shares anytime, offering liquidity and ease of transacting.
• The stricter regulatory framework based on corporate governance, disclosure, and financial reporting helps build investor confidence by enforcing stringent rules and standards.
• Unlike an LTD, whose maximum number of shareholders is 50, a PLC can have unlimited shareholders, spreading the risk more widely.
• PLCs often receive free publicity, as news outlets regularly discuss their performance, attracting attention from potential investors and customers.

Tax benefits

• PLCs are more likely to have international operations, providing opportunities for international tax planning and the potential to benefit from tax treaties and lower tax rates in certain jurisdictions.
• With the resources at their disposal, due to their public share offering, PLCs are more likely to have research and development projects and benefit from R&D tax incentives in the UK.
• If you’re earning over £20,000, operating as a PLC might offer additional tax benefits. However, there are various factors to consider. It’s always a good idea to consult your accountant to determine the best business structure for your situation. They can provide personalised advice to help you make an informed decision.

Employee management benefits

Due to their broader capital base and diversified revenue, PLCs can offer better job security and other employee management benefits such as –

• Its larger organisational structure, with more departments and roles, allows for more significant career advancement and vertical and lateral movement within the organisation.
• The ability to offer publicly traded shares to employees as part of its compensation package may make it easier for them to attract quality talent.

PLC disadvantages

• Establishing a PLC involves substantial expenses. While registration fees are relatively low, you need approximately £50,000 to meet the legal requirement for minimum stock capital, making it a more costly option than other business structures.
• A PLC faces more intricate and detailed accounting and reporting requirements than a privately held company. Stricter regulations are in place to ensure greater transparency and accountability, protect public interest, and increase the complexity of financial practices.
• You'll have more shareholders once your company is publicly traded, which may dilute your ownership and control. If you’ve built your business from the ground up, adjusting to sharing control and decision-making with a broader group can be challenging. The company will also face increased public scrutiny regarding its financial performance and executive decisions, with its value influenced by financial market fluctuations and the trading of shares.

Read also: Shareholder Definition, Types, Roles, and Rights.

How is share capital structured in PLCs?

Share capital refers to the funds a business raises by issuing shares to investors. The minimum required capital for a public venture is £50,000, with at least 25% (£12,500) paid up before the company can start trading. This is significantly higher than a privately held company, which only requires a minimum equity capital of £1, making it more accessible for small businesses.

A PLC can offer shares to the public through the stock exchange, allowing access to a broad range of investors. In contrast, an Ltd can only issue shares to a maximum of 50 investors.

Public and private businesses can issue various shares, including ordinary and preference shares, each with different rights regarding dividends and voting. However, the liquidity of PLC shares—due to their trading on the stock exchange—makes them more attractive to investors than shares in a private company.

Can a PLC become a private limited company?

A public enterprise can transition to private through several legal procedures if maintaining its PLC status becomes impractical. Here are the primary methods:

1. Special resolution of shareholders: To re-register as a privately held company, a PLC should pass a special resolution with at least 75% of the shareholders' votes at an annual general meeting or in writing. This process is governed by Sections 97-101 of the Companies Act 2006. After passing the resolution, the director must submit Form RR02—Application by a Public Company for Re-registration as a Private Limited Company—to Companies House. If approved, Companies House will issue a trading certificate of re-registration, stating the new company name (if applicable) and the issue date. Disgruntled shareholders can challenge the re-registration resolution in court within 28 days of its passage.
2. Court order for capital reduction: Under Section 651 of the Companies Act 2006, a PLC can obtain a court order to reduce its capital below the £50,000 minimum requirement. The director must then apply for re-registration using Form RR08 - Re-register a public company as a private limited company following a court order reducing capital and attaching the court order.
3. Reduction of capital due to share cancellation: A PLC can re-register as a private business after reducing its capital by cancelling or redomination shares. The directors must pass a resolution and submit Form RR09—Re-register a Public Company as a Private Company Following a Cancellation of Shares—to Companies House, along with the director’s resolution and a printed copy of the amended articles of association.

See also: What is the role of a company director?

Can a private company limited by shares become public?

Yes, a private business limited by shares can become public by undergoing a series of steps to transition to a listed company. Here’s an overview of the process:

1. Re-registration as a PLC: The company needs to pass a special resolution to re-register as a PLC. This resolution, the amended articles, and the memorandum of association must be submitted to Companies House for approval.
2. Preparation for IPO: The company then prepares for an Initial Public Offering (IPO), during which it will offer its shares to the public for the first time. This involves:
   • Audit: Conducting a thorough audit of the company’s financials.
   • Financial Conduct Authority (FCA) approval: Preparing a detailed statement for approval by the FCA.
   • Stock exchange requirements: Ensuring compliance with the exchange’s minimum capital and regulatory requirements.
3. Creating a prospectus: The company must create a prospectus to inform potential investors about the company’s details, financial status, and associated risks.
4. Listing: Once the IPO is completed, the company’s shares will be listed and traded on the London Stock Exchange, officially becoming a public entity.

Can a Company Limited by Guarantee Become Public?

Typically, companies limited by guarantee (LBGs) are set up as non-profit entities, meaning they are not designed to generate profit and do not have shareholders. As such, an LBG cannot go public. If you’re aiming for a public listing, it’s more appropriate to establish a private business to transition to a publicly traded company later.

Find out more - Guide to Company Limited by Guarantee.

Is the Company Formation Process for a PLC Different from an Ordinary Ltd?

Yes, forming a public limited company involves additional regulatory requirements compared to an ordinary company. Key differences include:

• Higher Regulatory Standards: PLCs must adhere to stricter regulations, including having a minimum share capital of £50,000 and appointing a qualified company secretary from the Chartered Governance Institute.
• Director and Shareholder Requirements: PLCs need at least two shareholders and directors, whereas a Ltd only requires one.

Aside from these specific requirements, the basic incorporation process for a PLC is similar to that of a limited business.

How does the role of a company director differ between private and public companies?

The role of a company director varies significantly between public and private ventures. In a public business, directors must ensure adherence to stringent regulations set by the stock exchange and the Financial Conduct Authority (FCA). This includes comprehensive financial reporting, transparency requirements, and corporate governance standards. Furthermore, these directors are accountable to various stakeholders, including shareholders, regulators, and the public. They must navigate high levels of scrutiny regarding the company’s performance and decision-making.

On the other hand, directors of private businesses focus primarily on complying with Companies House requirements and other relevant regulations. This involves maintaining proper records, filing annual returns, and adhering to basic governance practices. They are accountable to a smaller group of stakeholders, usually consisting of shareholders and internal management, resulting in less public scrutiny compared to PLCs.