Public Limited Company (PLC)

Definition of Public Limited Company (PLC)

A Public Limited Company (PLC) is a type of corporation that operates under specific legal frameworks, permitting it to offer its shares to the public. Notably, shareholders in a PLC have their liability restricted to the amount they invested in the company’s shares. This type of business structure is prevalent in the United Kingdom and other countries influenced by English common law.

Key Characteristics

Shares Open to the Public: PLCs can sell their shares to the general public through stock exchanges.
Limited Liability: Shareholders’ liabilities are limited to the value of their shares.
Minimum Share Capital Requirement: For example, in the UK, a PLC must have at least £50,000 in allotted shares.
Corporate Governance: PLCs must comply with rigorous regulatory and reporting standards, including the appointment of directors and regular public disclosure of financial performance.
Perpetual Succession: The company’s life is independent of its shareholders. Share transfers do not affect its continuity.

Examples

BP (British Petroleum): A leading oil and gas company headquartered in London, holding the structure of a public limited company.
HSBC Holdings PLC: One of the world’s largest banking and financial services organizations, listed on multiple stock exchanges.
Barclays PLC: A major global financial services provider engaging in personal banking, credit cards, corporate and investment banking.

Frequently Asked Questions (FAQs)

What is the difference between a Public Limited Company (PLC) and a Private Limited Company (Ltd)?

A PLC can offer shares to the general public and is listed on a stock exchange, whereas a private limited company cannot. A private limited company is typically smaller, and its shares do not trade publicly.

What are the advantages of a public limited company?

Public limited companies can raise substantial capital by selling shares to the public. They also enjoy enhanced credibility and prestige, which can attract investors and business partners.

What are the compliance requirements of a PLC?

PLCs must adhere to strict regulatory standards including regular financial reporting, holding annual general meetings, and ensuring compliance with corporate governance codes.

Can a PLC revert to a private limited company?

Yes, a public limited company can be re-registered as a private limited company through a process known as “Re-registration”.

How is a PLC formed?

Formation involves registering with the relevant governmental body (Companies House in the UK), submitting required documents such as the Memorandum and Articles of Association, and complying with statutory requirements such as the minimum share capital.

Initial Public Offering (IPO): The process through which a private company becomes a public company by offering its shares to the public for the first time.
Shareholder: An individual or institution that legally owns a share of stock in a public or private corporation.
Corporate Governance: The system by which companies are directed and controlled, encompassing practices and processes to ensure that companies operate in the best interests of their stakeholders.
Limited Liability: A form of legal protection for shareholders where their financial liability is limited to the value of their investment in the company’s shares.
Stock Exchange: A marketplace where shares of publicly listed companies are bought and sold.

Resources for Further Study

The Companies Act 2006 (UK) link
Financial Times link
London Stock Exchange link

Suggested Books

Company Law by Alan Dignam and John Lowry
Principles of Corporate Finance by Richard A. Brealey, Stewart C. Myers, and Franklin Allen
Corporate Governance: Principles, Policies, and Practices by Bob Tricker

Accounting Basics: “Public Limited Company (PLC)” Fundamentals Quiz

### What is the primary feature that distinguishes a PLC from a private limited company? - [x] The ability to offer shares to the public. - [ ] The ability to issue bonds. - [ ] The requirement to have at least two directors. - [ ] The necessity to limit its shareholder count. > **Explanation:** A public limited company (PLC) can offer shares to the public and have its shares traded on a stock exchange, unlike a private limited company. ### What is the minimum share capital required for a PLC in the UK? - [ ] £10,000 - [ ] £20,000 - [x] £50,000 - [ ] £100,000 > **Explanation:** In the UK, a PLC must have a minimum share capital of £50,000. ### What is perpetual succession in the context of a PLC? - [ ] The company must dissolve if a shareholder dies. - [ ] Shareholders must approve all director appointments. - [x] The company's existence continues unaffected by changes in shareholders. - [ ] The company must annually issue new shares. > **Explanation:** Perpetual succession means that the company's existence is not affected by changes in its shareholders, ensuring continuity. ### Which body regulates PLCs in the United Kingdom? - [ ] Financial Conduct Authority (FCA) - [x] Companies House - [ ] Securities and Exchange Commission (SEC) - [ ] International Financial Reporting Standards (IFRS) > **Explanation:** Companies House is responsible for the registration and regulation of PLCs in the United Kingdom. ### What financial document must a PLC publish to its shareholders annually? - [ ] An expense report - [x] An annual report - [ ] Employee salary slips - [ ] Environmental impact report > **Explanation:** A PLC must publish an annual report which includes financial statements and directors’ report to its shareholders. ### What does compliance with corporate governance codes ensure for a PLC? - [ ] Enhanced profitability - [ ] Increased share value - [ ] Government subsidies - [x] Adherence to best practices in management and operations > **Explanation:** Compliance with corporate governance codes ensures that the company adheres to best practices in its management and operations, enhancing sustainability and accountability. ### How can a PLC raise more capital compared to a private limited company? - [x] By issuing shares to the public. - [ ] By taking more bank loans. - [ ] By selling more company assets. - [ ] By reducing operational costs. > **Explanation:** A PLC can raise substantial capital by issuing shares to the public, leveraging the stock market. ### What is an Initial Public Offering (IPO)? - [ ] A private bond offering. - [x] The first sale of shares to the public. - [ ] A restricted stock sale to employees. - [ ] A merger announcement. > **Explanation:** An Initial Public Offering (IPO) is the first sale of shares by a company to the public, marking its transition to a public limited company. ### Who are the owners of a PLC? - [ ] The directors - [ ] The government - [x] The shareholders - [ ] The investors only > **Explanation:** Shareholders are the owners of a public limited company. ### Which statement is true of limited liability in a PLC? - [ ] Shareholders debt is related to the company’s debt. - [x] Shareholders' liability is limited to their investment in the company’s shares. - [ ] Shareholders have no liability if the company borrows money. - [ ] Directors are fully liable for company debts. > **Explanation:** In a PLC, shareholders' liability is limited to the amount they have invested in the company's shares.

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