Key Takeaways

  • A public limited company (PLC) is a UK business structure that allows shares to be offered to the public and traded on a stock exchange.
  • Major advantages of public limited company status include easier access to capital, enhanced credibility, shareholder liquidity, and growth potential.
  • PLCs also face disadvantages, such as higher regulatory obligations, potential loss of control, public scrutiny, and takeover risks.
  • Understanding the formation requirements, compliance duties, and shareholder implications is essential before deciding to go public.
  • A PLC structure can significantly accelerate growth, but it requires careful planning, governance, and legal support.

There are many public limited liability company advantages and disadvantages that you should be aware of before forming your public limited liability company (PLC). This type of business structure is a limited company that is formed in the United Kingdom (UK). The PLC, also known as a publicly held company, can issue shares to the public. Similar to U.S. corporations, PLCs are highly regulated; in fact, PLCs are generally more highly regulated than U.S. corporations, as the UK government, Companies House, has additional formation requirements, maintenance fees, and shareholder requirements for operating such an entity.

Formation

To form a PLC, you need the following:

  1. At least 2 shareholders
  2. At least EURO 50,000 of shares
  3. A minimum of 2 directors
  4. A company secretary

While corporations can act as shareholders, at least one of the directors must be an individual. Similar to any U.S. corporation, the PLC must file formation documents with the state government. Particularly, the PLC will file the documentation with the Companies House, which is a government agency based in the UK. You will need to file the Articles of Association, a formal application, and pay the applicable fee. There are additional requirements that must be met, and it is important to visit the Companies House website to ensure that you remain compliant with all of the formation requirements, along with ongoing maintenance requirements, for your PLC.

If you want to use a sensitive word in your company’s name, you will be subject to additional scrutiny from the government. For example, similar to a U.S. corporation not being able to use a prohibited term, the UK may or may not allow certain sensitive terminology, depending on the industry in which you are operating. If you choose to use a sensitive term, the government will need to approve it before allowing you to begin operating your PLC. After you’ve submitted the required paperwork, the Secretary of State will need to approve the application.

Ongoing Compliance and Governance Requirements

Forming a public limited company is only the first step. Once established, a PLC must comply with ongoing governance, reporting, and disclosure obligations to maintain its public status. These include:

  • Annual financial reporting: PLCs must prepare and publish audited annual accounts, typically following International Financial Reporting Standards (IFRS), and file them with Companies House.
  • Regular shareholder communication: Public companies are required to hold an annual general meeting (AGM), where shareholders can vote on significant matters, including director appointments and dividend policies.
  • Corporate governance codes: Many PLCs must adhere to governance codes, such as the UK Corporate Governance Code, which sets standards for board composition, independence, and executive remuneration.
  • Market disclosures: Public companies listed on a stock exchange must promptly disclose material events (such as mergers, financial results, or leadership changes) to ensure transparency and investor confidence.

Failing to meet these obligations can result in regulatory fines, reputational damage, and, in extreme cases, delisting from the stock exchange.

Advantages

Below are some of the advantages to owning and operating a PLC:

  1. Ability to sell shares and raise additional capital
  2. Obtain additional financial assistance from investors to expand the company and its resources
  3. Limited liability, which means that the owners can’t be held personally liable for the company’s debts
  4. Liquidity, as shareholders can easily buy/sell their shares without having to worry about complex paperwork
  5. The value of shares is easy to identify since it is shown by the market capitalization
  6. Ease of acquisitions

Enhanced Market Presence and Credibility

One of the less obvious but highly significant advantages of public limited company formation is the enhanced market reputation it brings. Being listed on a public exchange signals financial stability, transparency, and long-term growth potential — factors that can build trust with customers, suppliers, and potential partners. This increased credibility can also:

  • Improve negotiation leverage with lenders and investors.
  • Make it easier to attract top talent by offering stock-based compensation.
  • Strengthen brand recognition and public awareness, which often correlates with revenue growth.

Disadvantages

While there are several advantages to owning and operating a PLC, there are some drawbacks too, which include:

  1. High costs
  2. Shareholders with no interest in helping the company
  3. Takeovers
  4. Greater scrutiny
  5. Difficulty in making decisions

It is generally more difficult to form a PLC than a U.S. corporation. You must hire both a securities attorney and an investment bank. The underwriter will then offer the initial shares to the public, while receiving a commission. This could cost hundreds of thousands of dollars.

While most shareholders will want to see the company do well, and help the company meet its long-term goals, some shareholders just want to make money for themselves without having any involvement.

Since the PLC is public, anyone can purchase shares at any limit. However, there might be hostile investors trying to purchase a significant amount of shares, giving them greater voting power over the significant decisions of the company. Therefore, such hostile investors might try to takeover the PLC entirely.

Also, having the company go public means that there is less control for the founders of the company. Once the company goes public, there must be a board of directors who represent the company and all of its shareholders. This means that all major business decisions must first be discussed by the board and voted on. This could lead to lengthy decision-making processes, as decisions won’t be able to be made right away. This also means that the founders will have less decision-making rights, as the board is generally in charge.

Once operating a PLC, your company will be subject to greater regulation, as the government will closely monitor the company’s financial performance.

Opportunities for Expansion and Mergers

A PLC’s ability to raise significant capital through equity markets makes it uniquely positioned for expansion. Public companies can use stock issuances to finance:

  • Domestic and international growth, including entry into new markets.
  • Mergers and acquisitions, using shares as part of the payment structure.
  • Large-scale research and development projects without relying solely on debt.

This financial flexibility allows companies to respond quickly to market opportunities and maintain a competitive edge.

Shareholder Benefits and Liquidity

The share structure of a PLC provides benefits not only to the company but also to its investors. Shareholders enjoy liquidity — the ability to buy or sell shares easily on the open market — and can potentially profit from share price appreciation or dividend payments. This liquidity can also make a PLC’s shares more attractive to institutional investors, increasing demand and potentially raising the company’s market valuation.

Regulatory Costs and Disclosure Risks

While access to capital is a key advantage, the trade-off is increased regulatory burden and compliance costs. Public companies must adhere to strict disclosure requirements, which can expose sensitive business information to competitors. Moreover:

  • Compliance with financial reporting and auditing standards is expensive and time-consuming.
  • Disclosure of executive compensation and strategic plans can invite public criticism.
  • Investigations or enforcement actions for non-compliance can harm the company’s market value and reputation.

Market Volatility and Short-Term Pressures

Once a company becomes public, its stock price is influenced by market forces beyond its control. This volatility can make long-term strategic planning more challenging, as management may feel pressure to deliver short-term earnings to satisfy shareholders. Additionally, negative publicity or economic downturns can quickly erode shareholder confidence and reduce the company’s valuation.

Risk of Hostile Takeovers

Because shares in a PLC are widely available to the public, there is always a risk that an outside entity could accumulate a controlling stake and attempt a hostile takeover. This can lead to sudden leadership changes, shifts in strategic direction, or even the dismantling of the company — outcomes that may not align with the founders’ vision.

Frequently Asked Questions

  1. What is the main purpose of a public limited company?
    A PLC allows a business to raise capital by selling shares to the public, enabling significant growth, expansion, and increased market visibility.
  2. How many shareholders are needed to form a PLC?
    At least two shareholders are required, and there’s no maximum limit, allowing for potentially thousands of investors.
  3. What are the biggest advantages of a public limited company?
    Key advantages include access to capital markets, enhanced credibility, shareholder liquidity, and the ability to fund major growth initiatives.
  4. What are the main disadvantages of a PLC?
    Disadvantages include heavy regulation, disclosure obligations, risk of takeovers, market volatility, and reduced founder control.
  5. Can a private company become a public limited company?
    Yes. Many businesses start as private companies and later transition to PLC status through an initial public offering (IPO) to raise capital and expand operations.

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