When looking to register a company, one of the first things to consider is what type of structure would be the most applicable to you. In the UK, companies can be categorised into two broad categories: public or private. In this post, we’re going to focus on public limited companies (PLCs).
We’ll tell you what they are, look at their advantages and disadvantages, and finally – we’ll answer whether a private company can become public. Let’s get started.
Key takeaways
- Public limited companies can raise significant capital by offering shares to the public through stock exchanges.
- PLCs face stricter reporting requirements and transparency obligations compared to private companies.
- A private company can transition to a public limited company by meeting specific regulatory requirements and filing necessary forms.
What does it mean to be public?
Most corporate bodies registered in the UK are private limited companies. However, a small portion of registered companies (as in they are registered with Companies House – the UK’s registrar of companies) are public limited companies. But what does this mean?
Whilst there are many differences between private and public companies, the biggest difference is the ability for a public company to offer its shares to the public via a stock exchange. Here’s what else you need to know:
- PLCs must allot at least £50,000 worth of shares, with £12,500 (one-quarter) of these shares paid up.
- PLCs are subject to increased reporting requirements and must provide a greater level of transparency with regard to their accounting.
- PLCs must have at least 2 directors and a qualified company secretary.
- Before a PLC may trade, once they have been incorporated – they must apply to Companies House for a trading certificate. This certificate will confirm that the company meets all the necessary requirements to be a PLC.
- A PLC’s name must end in either “public limited company” or “PLC” unless it is a Welsh company. In this case, it may end in either “cwmni cyfyngedig cyhoeddus” or “CCC”.
Similarities to private companies
Like a private company, a PLC offers limited liability to its members, where a member is only liable up to the monetary value of their shares.
The PLC structure also looks similar to a private company as it is owned by its members and managed by directors.
Advantages of a public limited company
A public company’s biggest advantage is that they are afforded the ability to raise capital by selling shares to the public.
By listing on a stock exchange, a PLC can attract funding from many different sources, including international investors. However, this may also become a disadvantage, as the value of the company is determined by a potentially volatile financial market.
Being a PLC carries a level of prestige. By listing on a stock exchange, the company can increase its reputation and in turn increase brand awareness.
Disadvantages of a public limited company
PLCs are held to a much higher standard and are under much greater reporting requirements when compared to private companies.
In order for a PLC to become listed, it will need to meet the requirements of the stock exchange they are looking to join. Typically, this will involve a particular number of shares being offered to the public, and attaining a minimum annual income.
Due to these requirements, many public companies remain privately owned.
Can a private company become a public company?
In short, yes. As long as a private company meets all the requirements to be a public limited company, the company may be re-registered as a PLC.
To undertake the re-registration, the form RR01 will need to be filed with Companies House, along with a copy of the special resolution for the re-registration and payment of the £20 filing fee.
Vice versa, a PLC can undertake a similar process to re-register as a private company, using form RR02.
If you have any questions regarding PLCs, or company formations in general, please leave a comment and we’ll be happy to help.
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