How to Start a Public Limited Company: A Complete Guide for Entrepreneurs
Are you thinking of starting a public limited company (PLC) in the UK or Ireland? A PLC is a type of business organization that operates as a separate legal entity from its owners. It is formed and owned by shareholders, and its shares can be freely sold and traded to the public. A PLC can be either an unlisted or listed company on the stock exchanges.
Starting a PLC can have many benefits for entrepreneurs, such as:
– Raising capital by issuing public shares
– Enhancing the reputation and credibility of the business
– Attracting talent and investors
– Limiting the liability of the shareholders
However, starting a PLC also comes with some challenges and responsibilities, such as:
– Meeting the minimum share capital requirement of £50,000
– Complying with the registration and reporting requirements of Companies House
– Holding annual general meetings and publishing periodic reports to shareholders
– Facing more competition and scrutiny from the market
In this article, we will explain what a PLC is, how it differs from other types of companies, and what are the steps to start a PLC in the UK or Ireland.
What is a Public Limited Company (PLC)?
A public limited company (PLC) is a public company under United Kingdom company law, some Commonwealth jurisdictions, and the Republic of Ireland. It is a limited liability company whose shares may be freely sold and traded to the public (although a PLC may also be privately held, often by another PLC), with a minimum share capital of £50,000 and usually with the letters PLC after its name.
Similar companies in the United States are called publicly traded companies. Public limited companies will also have a separate legal identity.
A PLC can be either an unlisted or listed company on the stock exchanges. In the United Kingdom, a public limited company usually must include the words “public limited company” or the abbreviation “PLC” or “plc” at the end and as part of the legal company name. Welsh companies may instead choose to end their names with ccc, an abbreviation for cwmni cyfyngedig cyhoeddus.
However, some public limited companies (mostly nationalised concerns) incorporated under special legislation are exempted from bearing any of the identifying suffixes.
The term “public limited company” and the “PLC”/”plc” suffix were introduced in 1981; prior to this, all limited companies bore the suffix “Limited” (“Ltd.”), which is still used by private limited companies.
How Does a PLC Differ from Other Types of Companies?
A PLC differs from other types of companies in several ways, such as:
– Share capital: A PLC must have a minimum share capital of £50,000, of which at least 25% must be paid up before trading can commence. A private limited company can have any amount of share capital, as long as it is sufficient to cover its liabilities.
– Shareholders: A PLC can have an unlimited number of shareholders, who can buy and sell their shares on the open market. A private limited company can have up to 50 shareholders, who cannot transfer their shares without the consent of other shareholders.
– Directors: A PLC must have at least two directors and one secretary, who are responsible for managing the business and complying with the legal obligations. A private limited company can have one director and one secretary, who may also be shareholders.
– Disclosure: A PLC must register with Companies House and file annual accounts, annual returns, and other documents that are available to the public. A PLC must also publish periodic reports to its shareholders and hold annual general meetings. A private limited company only needs to file annual accounts and annual returns with Companies House, which are not available to the public. A private limited company does not need to publish reports or hold meetings unless required by its articles of association.
– Taxation: A PLC pays corporation tax on its profits at the same rate as a private limited company. However, a PLC may also pay dividends to its shareholders, who are subject to income tax on their dividend income. A private limited company can distribute its profits to its shareholders as dividends or salaries, which are subject to different tax rates depending on various factors.
What are the Steps to Start a PLC in the UK or Ireland?
The steps to start a PLC in the UK or Ireland are similar to those for starting a private limited company, with some additional requirements. Here is an overview of the main steps:
1. Choose a unique and suitable name for your PLC. The name must include “public limited company”, “PLC”, “plc”, or “ccc” (for Welsh companies) at the end. You can check the availability of your chosen name on Companies House website or on the Companies Registration Office website for Ireland.
2. Prepare the memorandum and articles of association for your PLC. The memorandum is a document that states the name, address, and objectives of your PLC. The articles of association are the rules that govern the internal management and operation of your PLC. You can use the model articles provided by Companies House or by the Companies Registration Office, or draft your own customised articles.
3. Appoint at least two directors and one secretary for your PLC. The directors are responsible for running the business and complying with the legal obligations. The secretary is responsible for keeping the records and filing the documents with the authorities. The directors and secretary must be at least 16 years old and not disqualified from holding office. They can also be shareholders of your PLC.
4. Raise the minimum share capital of £50,000 for your PLC. You can issue different types of shares, such as ordinary shares or preference shares, to different investors. You must ensure that at least 25% of the nominal value of each share is paid up before trading can commence. You must also issue a prospectus or an information memorandum to inform potential investors about your PLC and its shares.
5. Register your PLC with Companies House or with the Companies Registration Office. You need to submit the following documents and information:
– The completed application form (Form IN01 for UK or Form A1 for Ireland)
– The memorandum and articles of association
– A statement of compliance confirming that you have met all the legal requirements
– A statement of capital and initial shareholdings
– A statement of guarantee (if applicable)
– The details of the directors and secretary
– The registered office address of your PLC
– The fee for registration (currently £40 for UK or €100 for Ireland)
6. Start trading as a PLC. Once you receive the certificate of incorporation from Companies House or from the Companies Registration Office, you can start trading as a PLC. You need to display your PLC name and registration number on your website, stationery, and premises. You also need to keep accurate accounting records, file annual accounts and annual returns, publish periodic reports to shareholders, hold annual general meetings, and pay corporation tax on your profits.
What is a Public Limited Company?
A public limited company (PLC) is a type of business organization that operates as a separate legal entity from its owners. It is formed and owned by shareholders, and its shares can be freely sold and traded to the public. The minimum share capital required for a public limited company is £50,000 in the UK. In the US, similar companies are called publicly traded companies. Public limited companies are also known as publicly held companies .
Public Limited Company vs Private Limited Company
One of the main differences between a public limited company and a private limited company is the ability to raise capital by issuing public shares. A listing on a public stock exchange attracts interest from hedge funds, mutual funds, and professional traders as well as individual investors. That tends to lead to increased access to capital for investment in the company than a private limited company can amass .
However, there are also some disadvantages of being a public limited company. They are required to hold annual general meetings open to all shareholders and are held to higher standards of transparency in accounting. They also face more regulation and scrutiny from the authorities and the media .
Global Demand for Public Limited Companies
The global demand for public limited companies depends on various factors, such as the economic conditions, the industry trends, the investor preferences, and the legal frameworks of different countries. According to a report by Ernst & Young, the global initial public offering (IPO) activity in 2022 was robust despite the challenges posed by the COVID-19 pandemic. There were 1,591 IPOs globally, raising $268 billion, which was an increase of 19% and 26% respectively from 2021 .
The report also highlighted that the technology sector was the most active in terms of IPOs, followed by industrials and health care. The US was the leading market for IPOs, accounting for 28% of the global IPO volume and 40% of the global IPO proceeds. The UK was the second-largest market in Europe, with 54 IPOs raising $12 billion .
The outlook for 2023 remains positive, as many companies are expected to take advantage of the favorable market conditions and investor appetite for public offerings. However, there are also some risks and uncertainties that could affect the global demand for public limited companies, such as geopolitical tensions, regulatory changes, environmental concerns, and cyberattacks .
References:
http://www.legislation.gov.uk/ukpga/2006/46/section/58
https://www.gov.uk/bankruptcy/restrictions
https://thebusinessprofessor.com/business-governance/public-limited-company-definition
https://www.investopedia.com/terms/p/plc.asp
https://www.ey.com/en_gl/news/2022/01/ey-global-ipo-trends-report-q4-2022
https://en.wikipedia.org/wiki/Public_limited_company
https://www.gov.uk/limited-company-formation/choose-company-name
https://www.gov.uk/government/publications/incorporation-and-names/incorporation-and-names#exemptions-from-using-limited-in-a-company-name
https://www.gov.uk/government/publications/incorporation-and-names/incorporation-and-names#history-of-the-plc-suffix
https://www.gov.uk/limited-company-formation/set-up-your-company
