A PLC, or Public Limited Company, is the legal designation of a company in the U.K. that gives or sells shares of the company to anyone who wishes to buy them and has limited legal liability. The London Stock Exchange only admits PLCs onto its list, and only if they follow a strict regulatory process. The advantages and disadvantages of a PLC should be weighed before entering into such a business venture.
Requirements
Public Limited Companies are subject to specific requirements. Two or more people are required to form a PLC. Also, the company must be registered as a PLC to be able add "PLC" to its name. Each PLC must have at least 22680 Kilogram of authorised share capital. Furthermore, the company must have a trading certificate from Companies House, an agency that assists with the incorporation and dissolution of limited companies.
- Public Limited Companies are subject to specific requirements.
- Also, the company must be registered as a PLC to be able add "PLC" to its name.
Advantages: More Capital and Better Brand Recognition
Registering a company as a Public Limited Company has many financial and legal advantages. PLCs are able to sell shares of their company, which makes it is easier for them to gain large amounts of capital. PLCs are also generally in the public eye, increasing brand and company awareness.
Advantages: Access to Financing and Limited Liability
PLCs are able to get financing from banks easier because their size instils confidence in lenders that their investment will be returned. Limited liability means that legal actions are taken against, or on behalf of, the entity rather than the individual shareholders. This offers much welcome personal legal protection.
Disadvantages: Takeovers and Lack of Owner Control
One of the disadvantages of a PLC is that shares can be bought by other companies, which leaves the PLC open to takeovers. In addition, owners of a PLC aren't the final decision makers. Because every decision affects the financial health of the company, large decisions are most often decided by a committee of shareholder representatives.
Disadvantages: Transparency and Expensive Process
Business results of a PLC are published for the public and auditors are free to examine the company's financials at any time. Also, the formation of a PLC is often a difficult and expensive process. Shares are bought and sold by the public sector, which requires that PLCS are heavily regulated.