Public Limited Companies

Definition and Key Features

A public limited company (PLC) is a type of company that is permitted to offer its shares to the public.
Being a separate legal entity, a PLC is distinct from its owners, meaning it can enter contracts, own assets, and sue or be sued in its name.
Liability of the owners is limited to the extent of their investment, thus insulating their personal assets from company’s liabilities.
A PLC must have a minimum issued share capital of £50,000, with at least 25% paid up.

Formation of a PLC requires at least two directors and a qualified company secretary.
The company needs to be registered with the Companies House and must submit a ‘memorandum of association’ and ‘articles of association’.
A certificate of incorporation is issued once registration is complete, and then shares may be offered for public.

Public limited companies are governed by a Board of Directors who are elected by shareholders.
Ongoing compliance with rules and regulations is overseen by a Company Secretary, whose main duties include ensuring legal obligations are met and maintaining company records.
Transparency in governance is essential, hence PLCs are required to publish their financial accounts and hold Annual General Meetings (AGMs) for shareholders.

A PLC raises capital through the issue of shares to the public, institutional investors, and through listing on the stock exchange.
The investors, or shareholders, have the right to receive dividends which are distributed out of the company’s after-tax profits.
The value of shares can fluctuate based on the company’s performance and market sentiment, which can influence investor confidence.

Major advantages of a PLC include ability to raise large capital, limited liability, transparency, and the prestige of being a publicly listed company.
The disadvantages, however, include regulatory compliance leading to operational delays, vulnerability to takeovers, and the pressure to maintain short-term performance due to market expectations.

Public limited companies are required to publish financial statements – including balance sheet, income statement and cash flow statement – which provide valuable insights into company’s financial health.
Ratio analysis, benchmarking and trend analysis are often used to assess the company’s performance, where factors such as profitability, efficiency, liquidity, and solvency are considered.
A PLC’s effectiveness in managing its resources and creating value for shareholders can be ascertained through these evaluation methods.