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Public Limited Companies

Find out what you need to know about forming a UK company

What are Public Limited Companies?

In the UK, public limited companies are the type of limited companies which are legally permitted to offer their shares for sale to the general public to raise funds for business. In short, a public limited company is called as PLC. It is not compulsory for a PLC to provide its share to the public all the time, but, this is an option available whenever there is a need.

Formation of public limited companies is very rare as compared to private limited companies in the UK. More about 95% of limited companies are private limited companies. Both the public and private limited companies have several differences; also there are certain requirements which a public limited company requires to match.

  • In case of a public limited company, you need to have at least two shareholders, and a private limited company requires only one.
  • Within a PLC, there is a requirement of at least two registered directors and only one director is needed for a private limited company.
  • The accounts of the company must be filed within 6 months to HMRC by the end of financial year. And for a private limited company, this limit is 9 months.
  • For a PLC, you need to appoint a fully-qualified secretary for your company. But for a private limited company, you don’t need to appoint a qualified person for the secretary position.
  • There are many benefits of being a public limited company, especially, if you want to raise capital for commercial use.
  • Better access to capitals: You can increase your share capital from existing or new investors.
  • Liquidity: Shareholders are able to buy and sell their shares (if they are quoted on a stock exchange).
  • The value of the shares: Market capitalization (based on the shared price) represents the value of your company.
  • Opportunity to make acquisitions: You can make acquisitions by providing shares to the shareholders of other targeted firms.
  • Enhance the knowledge base as well as the expertise of your firm.
  • Give your business a more prestigious and professional public profile.

Every company has a separate legal identity. Having a separate identity from the shareholders and management means, you have protection through incomplete liability. This is an important aspect of registration. It means members are liable to pay only for the unpaid amount on their shares if the business fails. 

Becoming incorporated means that your company name is protected. Once registered in the company index name, no-one else can use it to trade under. To protect trading names, the sole traders and partnerships have trade legislation. As a PLC, the name of your company name will remain your liability.

Sole trader and partnerships have to pay the basic or high rate income tax. Whereas public limited companies have to pay corporation tax rates, currently, the rate is fixed to 20%. There are tax allowances and tax-deductible costs which can be offset against the profits of the company for higher tax savings.

Once you have formed a public limited company, there is a higher sense of continuity for your company. The company will remain open and continue smoothly, even if something unfortunate happens to the directors, employees, or management of your company.

The one and the only way to stop a company to operate is when it is wound up or be put on hold by the Registrar of the company or court.

Although there are profitable advantages of running a business as a PLC, there are some distinct disadvantages. These disadvantages are most important to think about if you are running a company as a private limited company and thinking about changing it to a public limited company. The most important points you have to consider are discussed further.  

There are many liabilities to start a PLC, i.e.

  • Before traded on a stock exchange publicly, a PLC must have at least two shareholders.
  • The accounts of the company must be submitted within 6 months of financial year’s end.
  • It should have minimum two directors to start its procedure.
  • Also, the secretary of the company must be certified.

To protect public investors, you have to follow several regulations and controls given below:

  • 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.
  • Running a business as a PLC, there are maximum chances that the real owners of the business can lose the overall controls of the company on the issue of violation or dispute.
  • Some PLCs grow very large instantly. As a result, they have to face a lot of issues such as slow decision making and mismanagement.
  • High public scrutiny on the financial performance and actions of the company

will govern the value of the company through the trading of the company's shares and will represent the views of the market about the performance of the company time-to-time. 

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