7 Reasons to Choose a Public Limited Company for Your Business
A public limited company (PLC) is a type of business entity that can offer its shares to the public and has limited liability. PLCs are common in the UK and some other countries, and they have many advantages for entrepreneurs and investors. Here are seven reasons why you might want to consider forming a PLC for your business.
1. Access to capital
A PLC can raise funds by selling its shares to the public, either through an initial public offering (IPO) or a secondary offering. This can provide a large amount of capital for the business to expand, invest, or innovate. It can also reduce the reliance on debt financing, which can be costly and risky.
2. Liquidity
A PLC’s shares are traded on a stock exchange, which means that they are easy to buy and sell. This gives the shareholders more flexibility and liquidity, as they can exit their investment whenever they want. It also gives the business more credibility and visibility, as it is subject to market scrutiny and regulation.
3. Limited liability
A PLC is a separate legal entity from its owners, which means that the shareholders are not personally liable for the debts or obligations of the business. This protects their personal assets from any claims or lawsuits that might arise from the business operations.
4. Corporate governance
A PLC has a clear and transparent structure of corporate governance, which involves a board of directors, a management team, and an auditor. The board of directors is elected by the shareholders and oversees the strategic direction and performance of the business. The management team is appointed by the board and executes the day-to-day operations of the business. The auditor is an independent professional who verifies the financial statements and reports of the business.
5. Shareholder rights
A PLC’s shareholders have certain rights and benefits that are guaranteed by law and by the company’s articles of association. These include the right to vote on important decisions, such as appointing directors, approving dividends, or changing the company name; the right to receive dividends, if declared by the board; the right to receive annual reports and accounts; and the right to participate in any surplus assets in case of liquidation.
6. Transferability of shares
A PLC’s shares are freely transferable, which means that the shareholders can sell or transfer their shares to anyone without any restrictions or consent from the company or other shareholders. This makes it easier for the shareholders to diversify their portfolio, find buyers, or exit their investment.
7. Prestige and reputation
A PLC is generally regarded as a more prestigious and reputable type of business than a private limited company (LTD), as it has to meet higher standards of disclosure, compliance, and accountability. A PLC can also attract more customers, suppliers, partners, and employees, as it demonstrates its financial strength, stability, and growth potential.
These are some of the main reasons why you might want to choose a PLC for your business. However, there are also some drawbacks and challenges that you should be aware of before making this decision. For example, a PLC has to comply with more complex and costly legal and regulatory requirements than an LTD; it has to disclose more information to the public and competitors; it has less control over its ownership and management; and it is exposed to more market risks and fluctuations.
What is a public limited company?
A public limited company (PLC) is a type of business entity that can offer its shares to the public. It is different from a private limited company (Ltd), which can only sell its shares to a limited number of people. A PLC has a separate legal identity from its owners, who are called shareholders, and is managed by a board of directors. A PLC must have a minimum share capital of £50,000 and must include the words “public limited company” or the abbreviation “PLC” or “plc” in its name.
How is the global demand for public limited companies?
The global demand for public limited companies depends on various factors, such as the economic conditions, the market trends, the industry sector, and the investor preferences. Some of the benefits of becoming a PLC are that it can raise more capital by selling shares to the public, it can increase its brand awareness and reputation, and it can attract more business partners and customers. However, some of the drawbacks are that it has to comply with more regulations and disclosures, it has to pay higher taxes and fees, and it may face more competition and pressure from shareholders.
According to a report by Ernst & Young, the global initial public offering (IPO) market in 2021 was the strongest in two decades, with 1,591 IPOs raising $268 billion in total. The report also projected that the IPO activity in 2022 would remain robust, driven by factors such as the economic recovery, the technological innovation, and the environmental, social, and governance (ESG) initiatives. The report highlighted that some of the most active sectors for IPOs in 2021 were technology, industrials, health care, consumer products, and financial services.
References:
http://www.legislation.gov.uk/ukpga/2006/46/section/58
https://dx.doi.org/10.1016/j.chb.2019.02.012
https://en.wikipedia.org/wiki/Public_limited_company
https://gocardless.com/guides/posts/what-is-a-public-limited-company/
https://thebusinessprofessor.com/business-governance/public-limited-company-definition
https://kalkinemedia.com/definition/p/public-limited-company
https://www.ey.com/en_gl/news/2021/12/global-ipo-market-ends-2021-with-record-breaking-performance
https://www.gov.uk/limited-company-formation/overview
https://www.investopedia.com/terms/p/plc.asp
https://www.businessnewsdaily.com/15150-public-limited-company.html
