A public limited company (PLC) is a public company in the United Kingdom. This structure is akin to a U.S. publicly traded company carrying the Inc. or corporation designation. The usage of the term “public limited company” or its abbreviation PLC after a company’s name signifies to investors and others that it is a publicly traded entity.
Key Highlights
- PLC Definition: Public limited company (PLC) is a term for public companies in the UK.
- Stock Exchange Listing: All firms on the London Stock Exchange are PLCs.
- Investor Access: Any retail investor can purchase shares in a PLC.
- Compliance: Public companies must regularly publish financial data and disclosures.
- Brand Examples: Notable UK brands like Burberry and Shell include PLC in their formal names.
Mechanisms of a Public Limited Company (PLC)
A PLC is a company that has offered its shares to the public, providing investors limited liability. This means investors are only responsible for financial losses up to the value they paid for the shares. Operating similar to U.S. public corporations, PLCs in the UK must publish financial health reports periodically.
Legal Requirements for a PLC
In the UK, company law mandates that a PLC must include either the “public limited company” designation or the abbreviation PLC after its name and have at least £50,000 in share capital. Analogous to public companies in the U.S., PLCs can issue various types of shares, including ordinary and cumulative preference shares. Ordinary shares are equivalent to U.S. common stock, while cumulative preference shares are similar to U.S. preferred stock. Additional requisites for a PLC include offering shares, appointing directors, and complying with registration requirements. The largest PLCs form part of the Financial Times Stock Exchange 100 Index, colloquially known as the Footsie.
The Pros and Cons of Forming a PLC
Advantages:
- Capital Raising: Enhanced ability to raise capital by issuing public shares. Listings on public stock exchanges can attract various investors, increasing the potential for amassing capital compared to private companies.
- Shareholder Liquidity: Shareholders have greater liquidity due to the public nature of shares.
- Acquisition Potential: Increased capability to acquire future capital and make acquisitions by offering shares to target companies.
Disadvantages:
- Regulatory Scrutiny: PLCs face stricter regulations and must hold annual meetings open to all shareholders, ensuring higher transparency.
- Shareholder Pressure: Increased vulnerability to shareholder and rival reactions.
- Market Volatility: Company valuations may become volatile, driven by market conditions.
Differentiation: Public Limited Company (PLC) vs. Private Limited Company (LTD)
A PLC is a publicly traded company, while a private limited company (LTD) is privately held. Private company shares are not available to the general public. Both require incorporation, but only PLCs must hold annual shareholder meetings and can freely trade their shares. Additionally, PLCs must have at least two directors, in contrast to LTDs, which need only one.
Investing in a PLC
Retail investors in the UK can easily buy shares in a PLC through a brokerage account. While more complex for non-UK residents, U.S. investors can also purchase PLC shares through brokerages that facilitate trading in foreign markets or via American depositary receipts (ADRs). However, investors should be aware of the additional currency risk.
Examples of Prominent PLCs
Companies listed on the London Stock Exchange, such as Burberry Group plc, Rolls-Royce Holdings plc, and others, fall under PLCs. The largest ones form the Financial Times Stock Exchange 100 Index or the Footsie, representing the UK economy as the Dow Jones Industrial Average does for the U.S. Also, not all PLCs are exchange-listed; some may choose or be unable to meet listing requirements but can still function as PLCs independently.
What It Means to Be a Public Limited Company (PLC)
A PLC signifies a publicly traded company in the UK that must include “public limited company” or the abbreviation PLC after its name. For instance, BP plc indicates its standing as a publicly traded company based in London.
Ownership Structure of PLCs
PLCs are owned by shareholders and are traded on exchanges where shares can be bought or sold openly. This contrasts with private companies (LTDs), which do not trade publicly and have share and shareholder restrictions.
The Defining Traits of a PLC
The hallmark of a PLC is its UK base and public trading status. It must contain PLC or “public limited company” as part of its designation.
Comparing Public and Private Limited Companies
The primary difference between a PLC and a private limited company lies in their public trading nature and required governance structures: PLCs must have at least two directors compared to one for LTDs. Though both are officially registered, the public nature and associated regulatory expectations distinguish PLCs from LTDs.
The Bottom Line
A PLC, functioning similarly to a U.S. Inc. or Corp., trades on the UK stock market. Many high-profile companies based in the UK carry the PLC designation, exemplifying their public trading status and reflecting broader market engagement.
References
- Legislation.gov.uk. “Companies Act 2006 Section 58: Required Indications for Limited Companies”.
- Gov.uk. “Incorporation and Names”.
- Legislation.gov.uk. [“Companies Act 2006 Section 336: Public Companies [“and Traded Companies"]: Annual General Meeting”](https://www.legislation.gov.uk/ukpga/2006/46/section/336?timeline=false).
- Gov.uk. “Life of a Company (Event Driven Filings)”.
- Legislation.gov.uk. “Companies Act 2006 Section 58: Required Indications for Limited Companies”.
- Gov.uk. “Incorporation and Names”.
- Legislation.gov.uk. [“Companies Act 2006 Section 336: Public Companies [“and Traded Companies"]: Annual General Meeting”](https://www.legislation.gov.uk/ukpga/2006/46/section/336?timeline=false).
- Legislation.gov.uk. “Companies Act 2006 Section 755: Prohibition of Public Offers by Private Company”.
- Legislation.gov.uk. “Companies Act 2006 Section 154: Companies Required To Have Directors”.
- Legislation.gov.uk. [“Companies Act 2006 Section 336: Public Companies [“and Traded Companies"]: Annual General Meeting”](https://www.legislation.gov.uk/ukpga/2006/46/section/336?timeline=false).
- London Stock Exchange. “FTSE 100”.
