A business can become a public limited company (PLC) with advantages over sole traders and partnerships. Because it is legally distinct from its owners, a PLC is different. This shields them from personal obligations. This article will cover all about PLCs and their requirements.

What Is A Public Limited Company?

A public limited company (PLC) is a type of business. PLCs are legally distinct from their owners, unlike sole traders or partnerships. The capacity to sell shares to the public distinguishes PLCs. Outsiders can buy the firm and invest in its growth. Due to its public nature, it has additional obligations as a PLC. More tax paperwork, financial reporting, and honesty are required. Ltd company must disclose their financials to attract buyers. Thus, share buyers may access all the pertinent information.

PLCs are commonly listed on stock exchanges, allowing the public to trade their shares. This listing has made the company's finances and procedures public. Therefore, further transparency is needed. Public limited companies have limited liability, must be transparent, and can raise public funds. More prominent companies that wish to grow by attracting investors usually adopt this model.

Is Limited Company Private or Public?

UK-limited companies can be private or public. Public limited companies (PLCs) sell shares to anybody. More often, businesses are private limited corporations (Ltd). Many PLCs start as private little businesses before going public, requiring considerable development to achieve the £50,000 share capital minimum. The relevant papers and 75% shareholder approval must be presented to Companies House to become public Co Ltd.

Private limited businesses (Ltds) dominate the UK business. A few or one person privately holds these firms. The restricted liability of a private limited company protects its owners' assets from business debts and obligations. Company shares cannot be exchanged publicly since they are not listed on stock exchanges. Small to medium-sized firms and startups seeking a flexible and safe corporate structure may prefer private limited corporations, which have fewer legal restrictions.

Requirements

Anyone thinking about starting a business as a public limited company (PLC) in the UK needs to know these essential requirements.

Share Capital Requirements

A public limited corporation (PLC) must have £50,000 in share capital. This financial level separates UK PLCs from Ltds. Share capital, the value of shareholders' shares, underpins the company's operations and growth.

In reality, this means PLCs need a large capital pool to sustain their commercial activities, fund development, and offer financial security. Although the share capital is fixed, PLCs can have a broader range of shares with varying rights, giving them capital structure flexibility.

Free-tradable Shares

Freely tradable shares are unique to UK PLCs. PLC shares can be traded easily on stock markets, unlike Ltds, which require shareholder permission for share transfers. Investors like PLC shares because of their liquidity and ability to raise funds fast.

Trading shares on exchanges make PLCs more transparent and accessible. It allows the public to participate in these enterprises, expanding capital market involvement.

Legal Name and Identifying Suffixes

UK PLCs must incorporate "public limited company" or "PLC" in their legal names to establish transparency and clarify their legal structure. This name differentiates PLCs from other corporate entities and notifies the public, stakeholders, and investors of the company's public status.

Exceptions include PLCs formed under specific laws that are exempt from these suffixes. Exemptions are usually given depending on the company's history or circumstances.

Companies House Registration

PLCs must register with Companies House, a Department for Business, Innovation, and Skills agency. Companies House keeps a public registry of financial reports, ownership data, and other required documents.

Registration guarantees openness and accountability. It gives the public crucial PLC information, boosting trust in these publicly held corporations. Companies House centralizes business data for shareholders, regulators, and the public.

Directorship and Credentials

A minimum of one director is necessary for PLCs, although most have two. Directors are vital to firm governance and decision-making. They manage the corporation, represent shareholders, and ensure legal compliance.

PLC directors might have diverse experiences and qualifications, offering flexibility. Disqualifications include bankruptcy restraining orders, those over 70, and those under 16. These limits protect the PLC decision-maker's integrity and appropriateness.

Subscriber Agreements and Share Allotments

When a PLC is registered, its shareholders must agree to buy all or part of its shares. The company's memorandum of organization must list these subscribers and their share commitments. Subscriber agreements show their first investment in the firm.

PLCs must also have £50,000 in allocated shares, with at least 25% fully paid up. This investment strengthens the company's financial and operational capabilities.

Public Limited Company Advantages

The benefits of being a public limited company (PLC) generally outweigh the negatives. Share sales are appealing because they fund expansion, pay off debt, boost brand awareness, and boost reputation. These benefits can be revolutionary, but a PLC structure demands managerial reform.

Share Sales Raise Capital

IPOs are a significant benefit of becoming a PLC. This money helps the firm develop, diversify, and find new possibilities.

Funding Growth and New Opportunities

Share sales provide funds to explore new markets, acquire other firms, and create new goods and services.

Greater Brand Awareness

Being a PLC generates publicity. Increased exposure may promote brand recognition, making it simpler to contact more consumers and gain market share.

Improved Customer Perception

PLCs' openness and accountability can boost brand perception. Openness and regulatory compliance build consumer trust and loyalty.

These benefits can help organizations develop and expand by adopting a PLC structure. These advantages raise regulatory and reporting responsibilities, so it's essential to manage the transition and match it with the company's strategic goals.

Disadvantages of a Public Limited Company

PLCs have appealing benefits, but firms must weigh their drawbacks. They should evaluate their organizational structure, financial capabilities, and long-term ambitions to see if becoming a PLC fits their company plan and resources.

Increased Regulation

Taxation and Companies House compliance are tighter for PLCs. Regulatory constraints can increase operational and administrative expenses.

Shorter HMRC Tax Deadlines

HMRC enforces stricter tax deadlines for public limited enterprises. Shorter deadlines for tax returns and payments might raise tax compliance pressure and complexity.

Qualified Company Secretary

Ltd companies can hire company secretaries with different credentials, while PLCs must hire a qualified one. This condition may limit candidates and raise staff costs.