Are you planning to start your own business? Have you considered forming a Public Limited Company? A Public Limited Company or PLC is a type of company that offers shares to the public and can be listed on a stock exchange. It has its own legal identity, separate from its owners, and can raise capital from investors by issuing shares. This blog will cover everything you need to know about forming a Public Limited Company from what it is and how to register one to the features, advantages, disadvantages, and regulatory requirements of running one. We will also provide insights into the financial implications of being a PLC and considerations before starting one. Read on to learn more about this exciting business structure!
What is a Public Limited Company?
A Public Limited Company (PLC) is a type of business structure in the UK that allows companies to offer shares to the public and be listed on a stock exchange. This means that anyone can buy shares in the company, making it easier for the company to raise capital and grow. PLCs are required to have at least two directors, a qualified company secretary, and a minimum share capital of £50,000. They also need to meet certain legal and financial requirements, including filing annual accounts with Companies House and complying with regulations set out by the Financial Conduct Authority. Becoming a PLC can be a significant step for businesses looking to expand their operations and increase their visibility in the market.
How to Register a Public Limited Company?
Registering a public limited company in the UK involves several steps and must comply with the Companies Act 2006. Here’s a general overview of the process:
- Company Name: Choose a unique name for your company that is not already in use by another entity. Ensure that the name ends with “Public Limited Company” or its abbreviation “PLC.”
- Registered Office: Decide on the registered office address for your company. This is the official address where all communications and legal documents will be sent. It must be situated in the UK and can be different from your business address.
- Directors and Secretary: Appoint at least two directors for your company. There is no longer a requirement for a company secretary, but you can choose to appoint one if desired.
- Shareholders: A public limited company must have a minimum share capital of £50,000, with at least 25% of shares paid up. Multiple shareholders can hold the shares.
- Memorandum and Articles of Association: Prepare the memorandum of association, which outlines the company’s name, registered office, and objectives. Also, draft the articles of association, which govern the internal regulations and operations of the company.
- Preparing Documents: Prepare various documents, including Form IN01, which provides details about the company, its directors, secretary (if applicable), shareholders, and share capital. You’ll also need to provide a statement of capital, a statement of compliance, and any additional documents required.
- File the Documents: Submit the completed Form IN01 and other required documents to Companies House. You can file online or by post. Pay the registration fee, which depends on the method of filing and the company’s share capital.
- Certificate of Incorporation: Companies House will issue a certificate of incorporation once the application is processed and approved. This certifies the formation of the public limited company.
- Post-registration Requirements: After registration, you must fulfill certain obligations, including keeping registers of members, directors, and other important company details. You’ll also need to submit annual financial statements, hold annual general meetings, and comply with other statutory requirements.
It’s important to note that this is a general overview, and the process may vary based on individual circumstances. Seeking professional advice from a solicitor or company formation agent is recommended to ensure compliance with all legal requirements and regulations.
Who Owns a Public Limited Company?
Public Limited Companies, or PLCs, are owned by their shareholders. When a company goes public and becomes a PLC, it is able to sell shares of its stock to the public. Anyone can purchase these shares and become a part-owner of the company. The more shares a person owns, the larger their stake in the company will be. Shareholders have a say in how the company is run and can vote on important decisions such as electing board members or approving mergers and acquisitions. While the day-to-day operations of a PLC are typically managed by its board of directors and executive team, ultimately, it is the shareholders who own and control the company.
Advantages and Disadvantages of a Public Limited Company
A public limited company (PLC) is a type of business entity that offers shares to the public and is listed on a stock exchange. It has its own set of advantages and disadvantages. Here are some of them:
Advantages of a Public Limited Company (PLC):
- Access to Capital: One of the significant advantages of a PLC is the ability to raise capital from the public by issuing shares. This allows the company to fund its expansion plans, research and development, and other projects.
- Limited Liability: Shareholders of a PLC have limited liability, meaning their personal assets are protected in case the company faces financial difficulties or legal issues. Shareholders are only liable for the amount they have invested in the company.
- Perpetual Existence: A PLC has perpetual existence, meaning it can continue its operations even if the shareholders or directors change. This provides stability and continuity to the business.
- Credibility and Prestige: Being a publicly listed company can enhance the credibility and prestige of the business. It can attract more investors, customers, and business partners and provide opportunities for mergers and acquisitions.
- Liquidity of Shares: Shares of a PLC can be freely bought and sold on the stock exchange, providing liquidity to the shareholders. This allows investors to convert their investments into cash if needed easily.
Disadvantages of a Public Limited Company (PLC):
- Regulatory Requirements: PLCs are subject to extensive legal and regulatory requirements. They must comply with financial reporting, disclosure, and governance regulations. This can be time-consuming and costly, requiring dedicated resources and expertise.
- Loss of Control: The company’s ownership is distributed among numerous shareholders as a PLC. This may result in the original founders or major shareholders losing control, as shareholders often make decisions through voting.
- Increased Scrutiny: Public companies face increased scrutiny from regulatory bodies, shareholders, and the general public. They must disclose financial information, strategic plans, and other sensitive data, which can limit confidentiality and expose the company to potential criticism.
- Short-Term Focus: Public companies often face pressure to deliver short-term results to satisfy shareholders and maintain stock value. This can sometimes hinder long-term strategic planning and investment decisions.
- Cost and Complexity: The process of going public and maintaining the status of a PLC can be expensive and complex. It involves costs associated with regulatory compliance, investor relations, and other professional services.
It’s important to note that the advantages and disadvantages may vary depending on the specific circumstances and industry in which the PLC operates. It is advisable to consult with legal, financial, and business professionals when considering the formation of a public limited company.
Financial Implications of Being a Public Limited Company
There are a number of financial implications to being a public limited company. One of the most significant is the need to comply with disclosure requirements under the Companies Act. This means that a public limited company must make its accounts and other financial information available to the public, which can be costly.
Another financial implication of being a public limited company is the need to maintain share capital. This is the minimum amount of money that shareholders must invest in the company. It is important to maintain this share capital in order to ensure that the company remains solvent and able to meet its financial obligations.
Public limited companies are also subject to corporate tax. This is a tax on the company’s profits, which can impact its bottom line.
Regulatory Requirements of Running a Public Limited Company
Running a public limited company comes with many regulatory requirements that must be adhered to remain compliant. One of the most important requirements is the need for transparency and accountability, which means that the company must provide regular updates to its shareholders about its financial performance and any other relevant information.
Additionally, there are regulations regarding the composition of the board of directors, with specific rules around independence and diversity. Public limited companies are also required to follow strict rules around their accounting practices, including mandatory audits and adherence to Generally Accepted Accounting Principles (GAAP). Finally, there are various reporting requirements that must be met, such as filing annual reports with Companies House and submitting filings with regulatory bodies like the Financial Conduct Authority (FCA). Staying on top of these regulatory requirements is crucial for running a successful public limited company.
Considerations Before Starting a Public Limited Company
Starting a public limited company is a significant decision that requires careful consideration. Before embarking on this journey, assessing whether it is the right choice for your business is important. Some factors to consider include the costs associated with going public, such as legal and accounting fees, as well as the additional reporting requirements and regulatory compliance that comes with being a publicly traded company.
It is also important to evaluate the potential benefits of going public, such as increased access to capital and greater visibility in the market. Ultimately, the decision to start a public limited company should be based on a thorough assessment of your small business goals and objectives and should be made in consultation with experienced professionals who can guide you through the process.
Conclusion
In conclusion, a Public Limited Company (PLC) is a legal structure that allows you to sell shares publicly, raising funds from investors to grow your business. It has greater regulatory requirements and financial implications compared to other business structures. However, forming a PLC can provide significant benefits such as increased credibility, access to capital markets, and limited liability protection. Before starting a PLC, consider the regulatory requirements, financial implications, and the advantages and disadvantages of this business structure. To learn more about PLCs and whether it’s the right choice for your business, read our comprehensive guide on the considerations before starting a Public Limited Company.
