What is a Public Limited Company UK?

by | Jul 23, 2020 | Company Formations | 0 comments

Content

Usually, in the UK, the most common type of companies found are private limited comapanies. However, even if you start out as a private limited company, it is possible to convert it into a public limited company UK over time. It is legally shortened to PLC and stated under UK company law.

Just like any limited company, a public limited company UK must be registered and consolidated in the company house. However, there are certain differences, advantages, pros, and cons to forming or converting to a public limited company UK.

For instance, if a company wants to generate vast capital. Then the most effective way to do that would be to form a public limited company. Nevertheless, UK startups are highly unlikely to begin doing business as a PLC.

The more common way that people follow in the UK is to first begin as a private limited company. And then later, once the business is established, convert into a PLC.

Public limited company definition

Public limited companies have limited liability. It implies that they are distinct legal entities separate from its owners and company shareholders just like private limited companies – the key difference being that it can offer shares to the general public. The shares of a limited company in the UK can be listed in the UK public stock exchange. They are traded and freely sold to the general public. As a result, PLCs are able to raise capital by making a public investment.

The general public who either draw a pension or have a share-based ISA. Sometimes, they have simply enjoyed a flutter on the stock exchange, therefore, hold shares in public limited companies. A significant percentage of the shares of a public limited company in the UK are usually owned by a pension. And investment funds (also known as “institutional investors”).

Difference between the private and public limited company

  • The main difference between the private and public limited companies in the UK is that unlike a public company, private companies are not able to offer shares to the general public.
  • Another notable point is that public limited companies require at least two directors. Whereas, private companies can have only one director appointed.
  • A private limited company may or may not appoint a company secretary. But a public limited company must have a company secretary.
  • Private companies are allotted a minimum of 9 months for filing their annual accounts and reports. However, a public limited company gets only 6 months to do the same.
  • As the shares are available for sale to the general public. The public limited company is required to hold general meetings with all the shareholders openly. Contrarily, private limited companies do not need to hold general meetings as such.
  • A public limited company or PLC cannot initiate the business until and unless the UK Companies House issues a certificate entitling the company to commence its business. The minimum share capital requires to start a public limited company in the UK is £500000. Whereas if it is a private limited company, then the minimum share capital would be £100000.
  • Lastly, there are no restrictions for a public limited company UK when it comes to managerial compensation. But in the case of private limited companies, managerial compensation cannot exceed more than 11 % of the net profits.

Public limited company examples

The easiest way to find a public limited company UK is from LSE or London Stock Exchange. To be more specific, you can find the largest public limited companies or PLCs in the UK.

From the FTSE 100 (Financial Times Stock Exchange 100), also popularly known as “Footsie”. It is basically an index where the largest PLCs in the UK are grouped together. These PLCs are capable of representing the whole economy of the UK.

However, it is not mandatory for every public limited company UK to list themselves on the public stock exchange. A company should be chosen if it wants to be enlisted or not, or it may not even be eligible for listing.

Footsie has some of the biggest PLCs by market capitalization. For instance, some of the public limited company examples UK include the names British Petroleum Company Limited, HSBC Holdings, Rolls-Royce Holdings, Royal Dutch Shell, British American Tobacco, and GlaxoSmithKline or GSK.

FAQ

How to form a public limited company in the UK?

As with a private limited company, you similarly need to choose a unique name for your business. Make sure to check registered trademarks in order to ensure it does not infringe on any other previously registered names/ trademarks.

After that, you need to complete your application form with information. The information you will need includes your company name, officially registered office address, company type, check company director details, and so on. It is important to remember that PLCs need at least 2 directors on board and also a qualified company secretary.

Along with that, it is also important to draft the Articles of Association and Memorandum. Only then file all of those association documents to the UK Companies House.

Then you need to apply for a trading certificate. As a PLC, you need to have at least £50,000 in allotted share capital. Among the whole amount at least 25 percent of which is paid in full. Then only you can commence your business.

How many public limited companies are there in the UK?

There are around 2 million limited companies in the UK, almost 95% of which are private limited companies. Therefore, around 5% (approx 100000) of UK limited companies are public limited companies.

Conclusion

There are several advantages of forming a public limited company UK. For one, there is no limit to the maximum number of members the company can have. There can be a maximum of 15 board of directors in PLCs. The shares associated with a PLC are freely transferable. It means these shares are sold and bought by people trading on stock markets. In terms of transparency in accounting, PLCs usually rank higher than private companies. PLCs are more strictly regulated by law. Therefore, unlike a private limited company, a PLC is mandated to publish its annual financial statements. It opens to its potential investors and shareholders.

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