Starting a business can be a daunting experience. There seems to be an endless list of factors to consider, such as whether to set up as a public limited company.
That is why we felt it necessary to compile all our expert knowledge and provide you with everything you need to know about public limited companies. Thus, we have written this complete guide to support those considering choosing a public limited company and those simply interested in gathering extra information on the topic.
We hope it is useful and helps you make an informed decision about your company. As experts in online company formations, our services can help you. So please don’t hesitate to get in touch with our team to find out more about how we can assist you in your company formation.
What is a Public Limited Company?
First of all, to make an informed decision about the set-up of your company, it’s essential to understand your options and what each of them are. For example, you may have heard of a public limited company referred to as such, or perhaps as PLC as it is sometimes known.
This type of company is a structure choice available for businesses in the UK. It is a popular option for those looking for something other than a sole trader or partnership structure. For example, unlike these two company structures, a public limited company is an entirely separate entity to its owners. Which, in itself, brings an abundance of benefits that we will explore in this article.
A public limited company is a business that shareholders own and is managed by directors. The shareholders can be anyone, as the option to purchase and hold shares is open to the public.
How Do Public Limited Companies Differ from Private Limited Companies?
Private and public limited companies can sometimes get confused due to similarities in their names. However, the two company structures are entirely different, offering a completely divergent set of advantages and disadvantages.
The key difference is in their names. A private limited company is privately owned and held by its members. In contrast, a public limited company is owned by anyone who has purchased shares within the company. These shares must be made public on the stock market, so the public can make an informed decision on whether they want to purchase them or not. It is illegal for private limited companies to sell shares publicly through trading on the stock market, and instead, they must transfer or sell their shares privately.
Another difference between the two company structures is public limited companies require at least one qualified secretary and two additional directors. Private limited companies do not require a secretary. Still, they do need at least one individual over the age of 16 acting as a director, who can also be a sole shareholder.
Finally, a public limited company must have a minimum of £50,000 in share capital, whereas private limited companies do not require a minimum share capital.
We understand this can get a little confusing. If you need help deciding which is the best choice for you and your company, we offer fantastic company formation services here at Company Registrations Online.
Examples of Public Limited Companies in the UK
As of January 2022, there were 2,010 public limited companies in the UK – a number declining on average since 2008. Here are some examples of some well-known public limited companies you may recognise:
- AstraZeneca Plc
- Barclays Plc
- Cineworld Group Plc
- easyJet Plc
- J Sainsbury Plc
- Marks & Spencer Group Plc
- Royal Mail Plc
- Tesco Plc
- Vodafone Group Plc
One of the first things you may notice about this list is that they all include the designation ‘Plc’ after their brand name, which indicates that a company is a public limited company. So, if you’re interested, you can be part of these hugely profitable companies just by purchasing a share of the business.
Advantages of Public Limited Companies
Whilst public limited companies aren’t the right choice for every business, they indeed come with some fantastic advantages – let’s take a look.
- Raised capital. The company can quickly raise capital through the sale of company shares. This money can be invested straight back into the business and used in various ways. For example, to assist in growth, help launch new ventures, research and development, or pay off debt.
- Brand awareness. You are putting your business out there and immediately increasing your brand awareness by choosing to go public. A public limited company generates interest from stock investors, which has a knock-on effect and increases the company’s awareness for potential employees, partners, suppliers, customers, or clients.
- Improve customer perception. When labelled as a public limited company, your business gains a sense of transparency. This is fantastic for improving your business’ customer perception, as it shows there is nothing to hide.
- Reduced risk. As equity is spread across a broad base of shareholders, the risks are immediately reduced.
- Easier to develop network links. Those investing in your company will want to see it succeed to gain a more significant profit themselves. Because of this, you will have a broader scope of people helping your business to grow and be successful, expanding your possible network and business links.
- Easier to access financial support. Keeping up a listing on the stock exchange is a high demand job that requires a lot of attention and financial support. Because of that, banks view public limited companies as safe bets and often accept financial support requests and provide them with better interest rates.
Disadvantages of Public Limited Companies
Whilst the advantages of public limited companies may seem attractive, it’s crucial to look at the whole picture and read into the disadvantages of this company structure too – let’s take a look:
- Two directors are needed. Unlike private limited companies, public limited companies require two different directors. This could be an issue if the two director’s visions do not line up or personal issues arise between them.
- Loss of control. A public limited company gives the public the option to purchase shares and essentially own a part of the company, giving them a certain degree of control. Thus, if over 50% of the shares are sold, members could take over the business altogether, leaving the directors responsible for actions they cannot control.
- Similarly to the previous point, a public limited company is vulnerable if another business buys up shares. They can force decisions and ultimately take over the business.
- Negative attention from the stock market. Going public has a long list of benefits, as discussed; however, if the company gets any negative press regarding its share price, it could seriously damage its reputation.
- Disunited company vision. As shareholders can be anybody, the original company vision could become lost. Therefore, everyone must share the same goals to have a unified and successful company.
- Increased regulations. Unlike a private limited company, there are many regulations and requirements that a public limited company must legally follow. We will take a look at these in further detail below.
What Are the Legal Requirements of a Public Limited Company?
In addition to the legal requirement of one qualified secretary and two different directors, there are many regulations that public limited companies must follow. Annually, they must have their accounts audited and filed with Companies House, send a report of any changes to directors and shareholders (also to Companies House), and publicly publish current profits, their financial position, and tax responsibilities. They must also hold an annual meeting, referred to in the industry as an AGM, where accounts and dividends are discussed with shareholders. Furthermore, directors must complete a Self-Assessment Tax Return annually to comply with the public limited company regulations. Finally, they must inform HMRC of any taxable profits within six months of the end of the financial year. Following this, Corporation Tax that is owed must be paid annually.
Can a Public Limited Company Become a Private Limited Company?
In short, yes. If you decide that you no longer wish to trade as a public limited company, you have the freedom to go private at any point. This decision is usually made if the directors feel like they would like to take back some control and that, unfortunately, the disadvantages now outweigh the advantages.
Luckily for you, if you have made this decision, Company Registrations Online are here for you. We are experts in our field, so if you’re looking to form a company in the UK or switch from public to private, please take advantage of our services.
How to Set Up a Public Limited Company
If you feel a public limited company is the most suitable route to go down, you must understand how to set up your company the right way. You will first need to gather some information and have the qualified secretary and two directors available and ready with the proper documentation.
Firstly, you must choose a unique company name that ends in Plc. You will need to provide this upon registration along with your registered office address, personal information from your secretary and two directors, and details of the initial shareholders.
Once you have gathered this information, you must prepare your memorandum and articles of association. Following this, you are now ready to register your company online. We will explain how the team here at Company Registrations Online can help below.
When your registration is complete and before you are legally allowed to start trading, you need to obtain a trading certificate; the form for this can be found on the Government’s website.
The final step in setting up your public limited company is to complete your initial public offering, often referred to as an IPO. A financial audit will be conducted to ensure that you are eligible, followed by completing a statement and application that will get passed onto your chosen stock exchange.
How Can CRO Help?
We have almost 30 years of experience in the company registration industry, so we are more than equipped to provide professional advice when registering your public limited company. Our Company Registration Packages are a fantastic place to begin, as they include everything you need to get your company up and running the right way.
The Al- Inclusive Company Formation Packages can include any or all of our add-on services and allow you to select the individual services that work for you and your business. For example, we offer:
- Bespoke Articles of Association approved by The Association of Company Registration Agents
- 12 months Managed Company Secretarial Service
- Fully completed Statutory Registers prepared under the Companies Act with completed Share Certificates
- 12 months Registered Office address
- VAT registration
- PAYE registration
- And so much more
To see the complete list of our services, head to our Company Registration Packages page. On here, you can view all services available and begin selecting those you would benefit from to form your bespoke package.
We hope that our complete guide to public limited companies has been helpful, and you now have a better understanding of this company structure. If you require any more information or have any questions regarding our company formation services, please don’t hesitate to get in touch, and a member of our team will be more than happy to help you out.