What Is a Public Limited Company: Definition and Specifics

In the UK, there are several company structures owners can choose from, and each one has its own peculiarities, opportunities, and restrictions.

One of the most widely chosen business structures is the public limited company. 

In the following sections, we explain what a public limited company is, how it works, and what its advantages and disadvantages are. We’ll also compare this structure to a private limited company and offer extra valuable insights on the topic.

What Is a Public Limited Company (PLC)?

A public limited company, or PLC, is a business structure which has the legal right to sell its shares to the public on the stock market. 

In a public company, the PLC’s shareholders enjoy limited liability. This means that they are responsible for the company’s debts, but only up to the amount that they’ve invested in the business. In other words, in a public limited company, personal assets are protected from business debts. 

In the UK, the PLC model is usually attractive to larger companies looking to raise capital from numerous investors, enabling growth and expansion. 

Key Features of a Public Limited Company

Let’s look beyond the basic definition of a public limited company and explore all the features and characteristics of this business structure. 

Legal and Structural Requirements

In order for an owner to register a PLC business, certain legal and regulatory requirements must be met. 

UK company law states that a public limited company can only be registered if the share capital is a minimum of £50,000. In addition, it’s obligatory that the company name contains “PLC” as the “public limited company” designation. 

In addition, a trading certificate from Companies House is required before beginning business activities and trading.

Share Structure and Capital

In a PLC, shares can be freely sold and traded on public stock exchanges. However, not all PLCs trade shares on exchanges, meaning that the business can be a listed company or an unlisted company. 

Above, we noted that there is a minimum share capital for this type of business – £50,000. £12,500 or a quarter of the share capital must be paid up. The company’s share price fluctuates based on market conditions and performance.

A PLC company can trade different types of shares, like ordinary shares, preference shares, redeemable shares, or cumulative preference shares, all going hand in hand with unique conditions. 

Public limited companies have the right to increase their authorised share capital, given that they pass an ordinary resolution. Exceptions can arise if the articles of association specify different requirements or an extraordinary resolution. 

Last but not least, it’s important to note that PLCs can raise funds from institutional investors or individual shareholders via public offerings. 

Transparency and Reporting

If you’re planning to register a public limited company, keep in mind that it’s subject to strict reporting requirements. 

For example, PLCs must prepare and file audited annual accounts with Companies House within six months of their year-end. These accounts must include a balance sheet, a profit and loss account, a cash flow statement, a directors’ report, and more. 

In addition, all public limited companies must have their accounts independently audited, no matter how big or small the business is. Not to mention that the publication of financial performance is always available for public review. 

Ownership and Shareholders

In a public limited company, the business exists separately from the owners or company directors, making them part owners. This naturally offers protection from liabilities and debt. 

Opening a public limited company requires at least two shareholders and two company directors. However, you can have more shareholders, which can potentially make ownership and control more difficult. 

In addition, the appointment of a qualified company secretary (a chartered secretary or accountant) is a must. 

Public Limited Company vs Private Limited Company

Private limited companies (LTDs) or privately held companies are another type of business structure that’s extremely popular in the UK. 

Needless to say, private and public companies differ in many ways.

Let’s look at the key differences between LTD vs PLC. 

Private limited company:

• The company’s shares are not traded publicly;
• Only requires one director;
• Only requires one shareholder;
• Must file their annual accounts within nine months of the end of the financial year;
• Are not obliged to hold an annual general meeting ;
• Directors mostly concentrate on meeting Companies House regulations.

Public limited company:

• The company’s shares are traded publicly;
• Require at least two directors; 
• Require at least two shareholders;
• Must file their annual accounts within six months of the end of the financial year;
• Must hold an annual general meeting;
• Directors must adhere to stringent regulations from the stock exchange and the Financial Conduct Authority. 

At the same time, LTDs and PLCs are also similar in some ways. For example, both business structures are obliged to pay corporation tax and both have to file annual accounts and report any corporate structure changes. 

While both structures may use business merchant accounts to accept customer payments, public limited companies have the unique ability to raise funds by offering shares to the public. 

Public Limited Company Advantages and Disadvantages

Just like any other business structure, PLCs have certain pros and cons. 

Let’s take a look at the most important ones.

Advantages of a Public Limited Company

Naturally, one of the biggest advantages of a PLC is its ability to work with publicly traded shares. 

Thanks to a broad and diverse capital base (from individual investors, hedge funds, mutual funds, and professional traders), a well-managed public limited company can tap into an endless pool of capital, enabling it to achieve its short- and long-term goals and growth plans. 

Here’s a breakdown of all key advantages of PLCs:

• Access to capital – PLCs can raise money by selling shares to the public, enabling large-scale funding.
  
• Limited liability for shareholders – Shareholders’ risk is limited to their investment in the company, making this structure suitable for those looking for personal guarantees.
  
• Increased market visibility – Listing shares on public exchanges boosts credibility and market presence. At the same time, public status can attract partnerships and opportunities for market expansion.
  
• Liquidity for shareholders – Shares can be easily bought or sold, offering liquidity to investors.
  
• Business longevity – The PLC structure enables continuity beyond the involvement of initial owners or directors.
  
• Potential tax benefits – PLCs earning over £20,000 can be subject to additional tax benefits.

Together, these advantages make public limited companies a much preferred structure for UK business owners. 

Disadvantages of a Public Limited Company

However, there are also a set of disadvantages of PLCs worth considering: 

• Regulatory burdens – PLCs must comply with strict regulations and reporting obligations, increasing administrative costs.
  
• Limited control – Selling shares dilutes ownership, reducing founders’ control over decisions. Major decisions may require approval through a special resolution.
  
• Market pressure – The need to maintain profitability can create pressure to meet short-term targets, which may impact long-term planning. In addition, PLCs are highly dependent on financial markets, leading to higher volatility.
  
• High costs – Significant expenses are involved in becoming and operating as a PLC, such as listing fees, compliance costs, and audits.

Before registering a PLC, make sure you’re fully aware of the potential challenges and have prepared plans to address them if necessary.

Steps to Form a Public Limited Company

Let’s say that a public limited company structure is an ideal fit for your business. 

How can you register a PLC and start operating?

Here’s the step-by-step process for forming a public limited company.

Step 1: Register with Companies House

The first step is to register with the Companies House. 

However, before you can do this, you’ll need to choose a company name. Don’t forget that it must end with “public limited company” or “PLC”. You’ll also need to have a registered office address in the UK and appoint directors and a company secretary. 

When registering, it’s also key to submit details about the company’s shareholders and share capital, along with a memorandum and articles of association. 

Step 2: Obtain a Trading Certificate

If your registration with the Companies House is approved, you will be issued a Certificate of Incorporation. This document confirms that the business now officially exists as a public limited company. 

You’ll also obtain a trading certificate, given that you have a minimum share capital of £50,000 and at least 25% paid up on each share. 

At this point, you’ll also need to register for Corporation Tax (within three months of starting a business).

Step 3: Public Offering of Shares

Next, it’s time to conduct an Initial Public Offering (IPO) or similar process to raise funds from the public.

For this phase, you’ll need a prospectus outlining everything that the company does and detailing its finances, risks, and purpose for selling its shares. Don’t forget that you must be approved by the FCA in order to conduct an IPO.

Apply to the stock exchange (usually the London Stock Exchange) and, after approval, your shares will be listed on the exchange, where anyone can buy and sell them. 

Is a Public Limited Company Right for Your Business?

Overall, public limited companies offer numerous advantages for some businesses. 

In most cases, they’re suitable for large companies searching for growth, businesses preparing for an IPO, or those in need of large-scale funding. This structure is also ideal for well-established businesses looking to broaden ownership.

However, there are also a range of challenges that you can come across when operating a PLC. Make sure to carefully consider your goals, growth plans, and capacity to meet regulatory and compliance standards before choosing the PLC status for your business. 

Frequently Asked Questions

Can a PLC become a private limited company?

Yes, a public limited company can be re-registered as a private company limited via a special resolution of shareholders, a court order for capital reduction, or a reduction of capital due to share cancellation.

What are some examples of public limited companies?

PLCs span various sectors, including retail, technology, manufacturing, and financial services. Some popular UK public limited companies include Tesco PLC, Barclays PLC, easyJet PLC, Royal Mail PLC, and others.

Are there any ways in which a private limited company is superior to a public limited company?

While there are certain advantages of LTDs, this structure doesn’t dominate PLCs in all senses. However, the advantages of an LTD are that it has lower setup and running costs, fewer regulatory requirements, more privacy, and less pressure from the public.