All You Need to Know About a UK Public Limited Company

Ryan Patrick

• 6 min read
All You Need to Know About a UK Public Limited Company

As small and medium-sized companies expand, they have decided to transition from a private company to a public limited company(PLC). Most companies charge to gain extra capital from selling shares to the public through the London Stock Exchange. Currently, the PLC has risen to 4% of UK limited businesses.

If you have a company and you're thinking of going public, it's great to know about a UK public limited company. This guide will explore what PLCs are, their characteristics, and their advantages. You will also learn how to set up a PLC so that you will know what you're getting your company into when transitioning to a PLC.

What's a Public Limited Company?

A PLC is a company that legally sells its shares to the public in the United Kingdom. Like in a private limited company, owners of the PLC enjoy limited liability, which means they're not responsible for business debts unless they give personal guarantees on company loans. Each individual's liability is limited to the number of shares they have.

Features of PLC

Let's explore the characteristics of a public limited company:

  • The company can sell shares to the public through the stock exchange.
  • The PLC collects raised share capital via selling shares to company shareholders.
  • The company needs to have at least £50,000 in shares, and it should have sold 25% of its shares before registering.
  • Similar to limited liability companies, individuals who are part of public limited companies bear limited responsibility for the company's debts. They are only accountable for the worth of their shares or any personal guarantees connected with loans.
  • A PLC is viewed as a separate legal entity distinct from its members
  • This company must have a minimum of two directors
  • It also needs two shareholders during registration
  • Public limited companies require an ICSA qualified secretary

Let's look at examples of PLC companies in the UK

  • Royal Mail Plc
  • Barclays Plc
  • Vodafone Group Plc

Who Qualifies to Buy Shares of the Public Limited Company?

Anyone can buy shares of a public limited company after its shares have been quoted on the London Stock Exchange. This is a big problem with companies that are listed on the stock market because it can mean losing control of members joining the company.

Advantages of PLC

There are a lot of advantages of PLCs transiting from LTD, and they are:

  • Raising capital: the share capital gained through the share sales provides the business with a source of income for the company's growth. The funds raised can also be used to launch new products, explore new markets, and increase research and business development.
  • Reduce risk: Unlike other investments where you give a lot of ownership to a few investors, selling shares spreads ownership among many people. The more shareholders there are, the lower the risk becomes.
  • Easy to develop extensive networks and new business links: the new shareholders would love to see the company succeed, increasing their share value and the dividends they receive per year. This will result in investors expanding the company network and building links with other companies that support growth.
  • Brand awareness: once you list your business on the stock exchange, it generates attention from investors, which helps in brand awareness. This makes your brand look more prestigious to suppliers, customers, and employees. Most PLCs experience an uplift in sales and employee retention after selling their shares to the public.
  • Simple exit strategy: you may wish to exit the business in the future, and it will not be easy if you are solely responsible for the company. You can quickly transfer the shares and company ownership when you're PLC. When your company becomes successful in the market, it can easily attract potential buyers and exit the company at a profit.
  • It's easy to access loans: Banks see PLCs as a safer loan option than private companies. This is because being listed on the stock market comes with specific requirements. So, publicly listed companies can get loans more easily than private ones. They can also have better interest rates and terms for paying back the loans.

Disadvantages of PLC

With all the advantages, transiting to PLC seems attractive; however, it has its downside. Compared to LTD, the PLC has these disadvantages.

  • An increase of rules and regulations: apart from having a qualified secretary and a minimum of two directors, PLC has various regulations that aren't in LTD companies. For example, you must obtain trading certificates and meet all minimum requirements.
  • Loss of control: in a public limited company, members have specific control over the business actions since directors are accountable to them. Additionally, If more than half of the company shares are sold, the members might take charge and remove the company director. Publicly traded companies don't have as much say in who buys their shares, and shareholders could impact the company with a different plan than what the directors have in mind.
  • Vulnerable to takeovers: In case another company wants to take over, they can buy the shares in PLC and exercise their shareholder power to change decisions from within. This means PLCs are vulnerable to takeover situations.
  • Stock market vulnerability: Although the PLC's being on the stock market allows it to access share capital, it can also expose it to share value changes. For example, in case of negative media attention, the company's share value will decrease, and its share price dictates its success.
  • Complex accounting requirements: in the PLC businesses, you must file accounts, audit them, and pay Corporation Tax within deadlines. Filling these accounts provides more data on your company's performance, which your competitors and investment analysts can use to judge your company.

Setting Up a Public Limited Company

If you want your company to become a PLC, you must know how to set one up. Here is the registration process:

The Registration Process

Before you start the process of setting up a PLC, your company must fulfill these:

  • It must have two directors and shareholders
  • The company must have sold 25% of its shares to the public, making a total share capital of a minimum of £50,000 or the equivalent in euros.
  • It must have an ICSA qualified secretary
  • During registration, have this information:
  • The PLC name must be unique to check use the checker tool from Companies House
  • Company registered address
  • Directors personal details and shareholdings they own
  • Initial shareholders' details include address, names, and number of shares allotted.
  • The next step is to prepare the article and memorandum of association. When you register online, the memorandum of association is generated automatically. If you register through post, you can use the memorandum template from the government. You can either use the articles of association model articles or create yours.
  • After completing all that, you can register your business online or post your application and Form INO1.
  • Before trading as a PLC, you must get a trading certificate showing you've met the necessary criteria. You can apply for the trading certificate using the SHForm.

Initial Public Offering (IPO)

When a limited company sells its shares to the public for the first time, it's called an initial public offering (IPO). An IPO means the company is changing from being privately owned to being owned by the public. That's why people also call the IPO process "going public." However, before this, your company must go through auditing to ensure its strong financial position. You must prepare a registration statement and file it with the Financial Conduct Authority.

Your application is then passed through the stock exchange. Once approved, you will contact an investment to help you decide the value of shares you need to offer on the exchange and at which price.

Accounting Responsibilities and Requirements

You must meet numerous responsibilities and requirements when setting up a PLC. Most of them revolve around accounting; let's explore them. Every PLC must:

  • Have its accounts audited and file with Companies house yearly. You must submit the first accounts within 18 months of registration, unlike 21 months for LTD.
  • Send yearly returns to Companies House and update them on any significant changes in a company, such as changes in shareholders and directors.
  • Submit your business tax return with the HMRC within six months of your financial year's end to notify them of your taxable income. Then pay your due Corporation Tax.
  • Publish the details of your current profits, tax, and financial responsibilities to the public through annual statutory accounts.
  • Invite the members to the annual general meeting to discuss accounts and dividends.
  • Company directors must complete self-assessment tax returns per year.

Remember, the government is stricter with PLCs than LTDs when they fail to fulfil the mentioned responsibilities. For example, if you delay filing the accounts, the fines are five times higher than LTDs.

Conclusion

A PLC is a company that can sell shares to the public to raise share capital by selling shares. This company members have limited liability to company debts, meaning they are separate entities from their shareholders. The shares' value determines each member's percentage of company control. However, the PLC has its downside, such as you must file annual accounts six months after the company's reference date, unlike an LTD, where you submit in 9 months. Do you have any question about a PLC or on company formation? Reachout to IncorpUk today.