Public Limited Company (PLC) Formation Requirements & Advantages UK

Formation of a Public Limited Company

Public or private, every form of company has its unique style of functioning. Also it depends on the potential of people engaged, what kind of company they would like to establish. Both has its pros and cons. Let’s read further to know better how public limited companies are advantageous.

What is a Public Limited Company?

When does one plan for a public limited company (PLC)? It is generally found only when one has the interest, facility and ability to form a public limited company, one forms a PLC. Public limited company will be suitable for you only if you are desirous of a company with a prestigious profile, good capital for resources and assets and also if you have the potential to advertise and sell company’s shares in the public. The main purpose of any PLC or public limited company should be the prospects to sell shares to public using Stock Exchange. But the fact is several of public limited companies are privately owned but for additional financial status they operate as PLC’s.

Who Can Apply for Public Limited Company?

Anybody who would take interest in Company with limited responsibility benefits, but he/she would like the additional financial status benefits or should be potent enough to sell shared to the public.

What are the Requirements for forming a PLC or Public Limited Company?

• Minimum 2 Directors
• Minimum 1 Shareholder
• Qualified Company Secretary
• The filing periods should be shorter for accounts on year ending or financial year ending
• Require to hire an AGM
• Usually more administration profiles
• You will require issuing minimum of 2 shares in the statement of capital section, and then you will have to file 12500 shares for which you have file an SH01 form.
• Completed form of SH50 has to be submitted to Companies. Before any trade begins House has to get a Certificate of Trade. This to prove that a minimum of 25% of £50,000 value of shares have been remunerated.

A public limited company (PLC) in UK can be completely owned by a foreign national. It builds lot of reputation, gives easy access to assets and funds and the capability advertise and sell shares to the public. Whereas, public sector companies go public and sell their shares via Stock Exchange, there are several privately owned PLCs are functional as PLCs for additional status, which helps them get more opportunities to get finances and capitals too.

The limited responsibility benefits that PLCs have are not usual for any company that has the potential to sell its shares through public Stock Exchange. It means the liabilities of shareholders are limited to the contribution they make to share capital, to protect their personal belongings from all kinds of liabilities that can be incurred by PLC. Although, usually public sector companies in the UK are large and well established business houses like the retail chain business or some big manufacturer, there is provision that a person can establish a PLC with protection of limited liability and can also sell its shares privately or on the Stock exchange.

Public Limited Companies (PLCs) are governed by The Companies Act of 2006 in the UK.

What are the Advantages of Forming PLCs?

• Public limited companies allow you to raise capital faster than a private limited company.
• If PLCs have shares listed on the London Stock Exchange then there is every chance that they will attract larger investments from diverse kinds of schemes and funds like hedge funds, mutual funds and funds from institutional traders union.
• By offering shares to the public, ownership risk is distributed amongst shareholders, who are in a large number.
• Existing investors can sell some part of their own share with new investors or even other existing investors for a profit and alongside can continue to maintain a huge stake in the company.
• It is beneficial to bank on wide range of investors for capital than banking on a few investors as several privately owned companies do. It is a usual phenomenon that limited number of investors can have more power over the company than large number of stake holders could ever have.
• Public limited companies may have extra sources of financing than private companies. It is a well-known fact that financial institutions and banks are ready to offer financing to a listed public company than to a private company.
• The potential to get more financing on superior conditions than privately owned companies lets the public limited companies to grow faster and expand better to get hold of new markets for new product selling opportunities and acquisitions too.

UK Public Limited Company (PLC) Benefits

Several benefits enjoyed by the Public Limited Companies in the UK :

• Foreign Ownerships: Public limited companies can be totally owned by foreign nationals too.
• PLCs have Limited Liability: Stakeholders or shareholders’ responsibility is limited to the value of the contributions made by then to the capital shares.
• Registration is Simple and Easy: The process of registration is very simple and easy.
• Shareholder: Amongst all, PLC can be formed by only one shareholder
• Two Directors: The requirement of directors is only two.
• Minimum Share Capital: In the beginning, only two shares are needed as per the policies for PLC formation.
• Stock Market Access: Public limited companies have access to public London Stock Exchange, which permits them to put ads and sell their company shares to the public in a simple and easy way.
• Political and Legal Systems: The UK has a very secure and stable political and legal system for centuries now.
• English: English is the official language.

Naming Your Public Limited Company (PLC) in the UK

In the UK a public limited company has to find out a unique name, which is not kept by other registered companies and corporations. “Holdings”, “International” and “Group” are some of the words that are defined as sensitive and some rules are expected to be followed to use them in company names. There is a rule of ending the company names with the abbreviation “PLC”. This is for indicating other companies that it is a public limited company and might be large in size.

Limited Liability

A shareholder of stakeholders’ responsibility is limited to their total contribution value made to the share capital. The responsibility then is extended to not paid amounts on the shares they hold. The limited liabilities or responsibilities are advantageous to managements too, though that is lesser than the stakeholders. Directors and shareholders are freed from all responsibilities of the company’s outstanding amounts unless they had given assurances like protecting a back loan.

Registration

The process of registration is very easy and simple for a public limited company. Only you will need to do is simply file the Articles of Association, all of which will describe the purpose of forming the company, capital & assets and membership at the Companies House. Without the approval of the registration by Companies House, no business can be conducted. Companies House then issues a Certificate for approval.

Company Secretary

Appointment of a company secretary is important in every PLC.

Company Address

It is important for every PLC to have a registered company address in the same UK wherever their PLC is registered, example – England or Wales.

Taxes

It is a rule that a PLC earning profits (taxable earnings) should file a tax return every financial year with HMRC and give the corporate tax on time. 19% is the present corporate tax. Additionally, employee’s PAYE, VAT, Construction Industry Scheme, etc. must be submitted at HMRC every tax/financial year. There is a requirement of a Self-Assessment tax return to be filed by Company directors every tax year.

Annual General Meetings

Annually general meeting of shareholders is a must for every PLC.

Accounting in Public Limited Companies

Public limited companies must file yearly return with the Companies House. And the annual accounts that they need to file with the Companies House must be audited unless not liable. Moreover, if there is any form of change required in the management of PLC then directors must file amendments with the Companies House.

PLC Public Records

Whatever is recorded with Companies House can be accessed for public assessment.

Shelf Companies

Shelf companies for a public limited companies are not available.

PLC Shareholders

To form a public limited company only one shareholder is necessary. In the beginning, PLCs can issue two shares during formation and registration. Then it can file SH01 form that allows them to issue up to 12,500 shares.

Going forward, PLCs can file SH50 form with the Companies House that makes them authorised to issue trade certificate even before trading begins. Whatever profits PLCs make they are distributed amongst shareholders as dividends. Transfer of shares from one buyer to another is easier for public limited than private companies.

Directors of PLCs

Minimum of two directors are required for every PLC to manage the company. Any person above 16 years of age can become a director. One natural person as a director is a must. Rest of the directors can be companies. Shareholders too can selected for the position of directors.

London Stock Exchange

All PLCs may not choose to be listed in London Stock Exchange, but every company listed in LSE is a PLC. To get listed in the London Stock Exchange the public limited companies have to be registered as a public company with minimum of 50,000 GBP certified share capital. They should also meet the filings and disclosers that are necessary for the London Stock Exchange.

About the author

Sumit Agarwal
Sumit Agarwal (ACMA ACA India), the Managing partner of dns accountants is a highly respected accountant with expertise in helping owner-managed businesses.