A public limited company (PLC) is a type of business structure commonly used in the UK. In a nutshell, it allows companies to raise capital by offering shares to the public through a stock exchange. But what exactly is a PLC, and how does it differ from other company types? In this guide, we'll explain everything you need to know including the advantages, disadvantages and how PLCs operate.
PLC meaning
The term public limited company (PLC) is a type of business structure where the company’s shares can be bought and sold by the public on a stock exchange. This structure is commonly used by large-scale businesses looking to expand and gain access to more significant investment capital. Typically, you'll see the phrase 'public limited company' or the PLC right after the company's name.
Some of the key characteristics of a PLC include:
Shareholder ownership: A PLC is owned by its shareholders, who can freely trade shares.
Limited liability: Shareholders’ personal assets are protected if the company faces financial issues, limiting their liability.
Regulation: PLCs must meet stricter legal and financial regulations than private companies. For example, PLCs must follow rules set by stock exchanges and European bodies governing corporations.
How do public limited companies work?
Public limited companies work by raising capital through the sale of shares to the public. The structure allows PLCs to attract investments while maintaining transparency for shareholders. Here’s how they typically work:
Incorporation: The business must register and incorporate as a public limited company with Companies House in the UK. You can learn more about the process and our memorandum of association solicitors here.
Minimum share capital: To follow the Companies Act 2006, PLCs are required to have a minimum share capital of £50,000, with at least 25% of this paid up before trading.
Stock exchange listing: Most PLCs list their shares on a stock exchange (like the London Stock Exchange), making them available for purchase by investors.
Transparency: PLCs must produce annual financial reports, hold an Annual General Meeting (AGM) and meet stricter disclosure standards than private companies.
Governance: A board of directors manages the company, ensuring compliance with legal and financial regulations.
💡Editor's insight
"In addition to the minimum capital requirements, the Companies Act 2006 states that a PLC needs a minimum of two directors (whereas a private limited company only needs one)."
Advantages of a PLC
There are many advantages to operating as a public limited company, particularly for large businesses. Just some include:
Access to capital: By offering shares to the public, PLCs can raise larger funds for expansion and growth.
Enhanced credibility: The transparency and regulation associated with PLCs often make them more attractive to investors and customers.
Transferable shares: Shares can be easily bought and sold on the stock exchange, providing liquidity for shareholders.
Economies of scale: The larger scale of PLCs can often lead to operational efficiencies, reducing costs.
Growth opportunities: With access to funding, PLCs can invest in innovation, research and entering new markets.
💡Editor's insight
"It's not just my opinion, but a known fact that PLCs are incredibly rare. According to Gov.UK's 2023 statistics, private limited companies have accounted for over 95% of corporate bodies since the financial year ending 2005. Plus, private limited companies, limited partnerships and limited liability partnerships (LLPs) combined have consistently accounted for over 98% of all corporate body types."
Disadvantages of a PLC
Despite its benefits, the PLC structure also comes with significant challenges. It's not surprising considering the small number of PLCs in the UK:
Increased regulation: PLCs face stricter regulatory requirements, including detailed financial reporting and shareholder disclosures.
Costly setup: Incorporating as a PLC involves higher initial costs, including legal and administrative expenses.
Loss of control: With shares traded publicly, original owners may lose a significant degree of control over the company.
Vulnerability to market conditions: Share prices can be volatile, affecting the company’s value and reputation.
Pressure for short-term performance: Shareholders often prioritise immediate returns, potentially limiting long-term strategic decision-making.
Recap: The pros and cons
Here’s a quick summary of the advantages and disadvantages of a PLC. Plus, you can learn more in our in-depth guide to the pros and cons of a public limited company.
Advantages | Disadvantages |
|---|---|
Access to significant capital | Increased regulatory requirements |
Enhanced credibility | More costly incorporation process |
Share liquidity | Potential loss of control |
Operational efficiencies | Vulnerability to market changes |
Growth opportunities | Pressure for short-term results |
When should a business become a public limited company?
A business might consider becoming a PLC when it has reached a stage where substantial capital is needed to grow. Some common scenarios include:
Scaling operations: When a business needs funds for large-scale expansion, including entering new markets or launching new products.
Attracting investors: Listing as a PLC provides access to a wider pool of investors.
Enhancing credibility: If a business needs to strengthen its reputation, the transparency of a PLC can help.
Meeting capital requirements: Businesses needing over £50,000 in share capital may find the PLC structure more advantageous.
You can learn more about the different types of companies in our full guide.
What are the differences between a PLC and an LTD?
The key primary differences between a public limited company (PLC) and a private limited company (LTD) are ownership, regulation, and operations. In general, an LTD is ideal for smaller, family-run businesses or start-ups and a PLC is better suited for companies with significant growth ambition.
Aspect | PLC | LTD |
|---|---|---|
Share trading | Shares are traded publicly on a stock exchange | Shares are privately held |
Minimum capital | £50,000 | No minimum capital required |
Regulations | Stricter regulatory requirements | Fewer regulations |
Ownership | Open to the public | Restricted to a few shareholders |
Transparency | Must disclose detailed financial reports | Limited disclosure obligations |
Three examples of public limited companies
All companies listed on the London Stock Exchange (LSE) are PLCs. You might already know that the 100 biggest PLCs on the London Stock Exchange are grouped in the Financial Times Stock Exchange 100 (FTSE 100). You can see some of the biggest in the UK for 2024 here. Otherwise, some of the most recognisable businesses in the UK operate as public limited companies. Some examples include:
Tesco PLC: One of the largest supermarket chains in the UK, Tesco uses the PLC structure to fund its extensive operations and expansion.
Barclays PLC: A leading financial services provider, Barclays leverages its PLC status to attract investors globally.
Unilever PLC: This multinational consumer goods company uses its PLC structure to maintain transparency and raise funds for its operations.
FAQs
What is a PLC?
A public limited company (PLC) is a business structure where shares can be bought and sold by the public on a stock exchange. It offers limited liability to shareholders and is subject to stricter regulations than private companies.
What is a PLC company?
A PLC company is an organisation registered as a public limited company, offering shares to the public and adhering to stricter governance and transparency standards.
What are the differences between PLC and LTD?
A PLC allows public share trading and requires a minimum capital of £50,000. On the other hand, an LTD is privately owned, has no minimum capital requirement and faces fewer regulatory obligations. You may also want to read up on the advantages and disadvantages of private limited companies too.
Final thoughts
A public limited company (PLC) is a business structure designed for significant growth and investment opportunities. While offering easier access to capital, PLCs also face stricter regulations and potential challenges with control and market pressures. Understanding the pros and cons, as well as the differences between a PLC and an LTD, is crucial for businesses evaluating whether to pursue this structure.
If you need legal support, our small business solicitors are here to help. Get in touch today for a free quote and to see how Lawhive can help.
References
Companies Act 2006, Part 5, Chapter 2, Required indications for limited companies
Companies Act 2006, Part 13, Chapter 4, Section 336, Annual General Meetings
Incorporation and names from Gov.UK
Disclaimer: This article only provides general information and does not constitute professional advice. For any specific questions, consult a qualified accountant or business advisor. Bear in mind that tax rules and legislation can change and will differ based on your circumstances.