What Is a Public Limited Company - PLC?
A public limited company (PLC) is the legal designation of a limited liability company (LLC) that has offered shares to the general public and has limited liability. A PLC's stock is offered to the general public and can be acquired by anyone, either privately, during an initial public offering or through trades on the stock market.
How a Public Limited Company - PLC Works
Public limited companies (PLCs) are commonly used in the U.K. and some Commonwealth countries, as opposed to "Inc." or "Ltd.," which are the norm in the U.S. and elsewhere. The mandatory use of the PLC abbreviation after the name of the company serves to instantly inform investors, or anyone dealing with the company, that the company is public and probably fairly large.
PLCs can be listed or unlisted on a stock exchange. Like any other major entity, they are strictly regulated and are required to publish their true financial health so shareholders (and future stakeholders) can size up the true worth of their stock. The life span of a PLC is not determined by the death of a shareholder.
PLCs are best used to raise capital, but they also bring increased regulation
Advantages and Disadvantages of a Public Limited Company (PLC)
The biggest advantage of forming a public limited company (PLC) is the ability to raise capital by issuing public shares. Selling shares to the public means anyone can invest in the company, meaning more capital can be amassed than as a private limited company. Being listed on an exchange can also attract interest and investment from hedge funds, mutual funds, and other traders.
Being a PLC also means that the risk is spread out. By allowing the people the ability to buy shares means they’re also buying into the risk. It also means that there’s big potential for growth and expansion, so PLCs can pursue new projects, buy more products, pay off debt and fund research and development (R&D).
But with the positives, there are also negatives. Being a PLC means there is more regulation, which can be burdensome for some corporations. They are required to have at least two directors and hold annual general meetings (AGMs), along with higher transparency when it comes to accounting. Because they’re public, they’re vulnerable to takeovers and require a higher initial financial contribution.
- A PLC is a legal designation of an LLC that has offered shares to the general public and has limited liability.
- Can be listed or unlisted on a stock exchange and are strictly regulated, required to publish their true financial health.
- The biggest advantage of forming a PLC is the ability to raise capital by issuing public shares.
Example of a Public Limited Company (PLC)
All companies listed on the London Stock Exchange (LSE) are, by definition, public limited companies (PLCs). For example, the oil company British Petroleum is formally called BP PLC. Clothing and accessory retailer Burberry is Burberry Group PLC. Automaker Rolls-Royce is Rolls-Royce Holdings PLC.
The 100 largest PLCs on the London Stock Exchange are grouped together in an index called the Financial Times Stock Exchange 100 (FTSE 100) or, colloquially, the "Footsie." The companies in this group are representative of the United Kingdom's economy as a whole. The FTSE is comparable to the Dow Jones Industrial Average (DJIA) in the United States.
Not all PLCs are listed on a stock exchange, therefore even if a company uses the PLC suffix in its name, it does not necessarily mean it is listed. Rather, it means that it meets the other requirements but has chosen not to be traded on a stock exchange or does not otherwise meet the requirements for being listed on an exchange.
Requirements for a Public Limited Company (PLC)
Originally, a PLC is formed like any other company. Two or more people are required to form it, and it is constituted by the filing of articles of association that describe its purpose, membership, and capital. A limited company grants limited liability to its shareholders and, to a lesser extent, its management.
Being a public company allows a business to sell shares to investors in order to raise capital. Only PLCs may be listed on the London Stock Exchange and have the suffix PLC on their ticker symbol. Several other requirements must be met to obtain and maintain the listing: the PLC must be registered as a public company, it must have at least £50,000 authorized share capital, and it must meet ongoing disclosure and filing requirements of the stock exchange.
[Fast Fact: All companies listed on the London Stock Exchange (LSE) are PLCs].