Public Companies Limited By Shares

A tiny minority of UK companies are public companies limited by shares.

Like private limited companies, public limited companies have the advantage that they are a separate legal person and the liability of the shareholders for what the company does is limited to the amount they have paid (or have yet to pay) for their shares.

They also offer the ability to have widely different classes of shares.

However, public limited companies can offer their shares for sale to the general public; private limited companies cannot. For this reason all the major UK companies whose shares are traded on the Stock Exchange have to be public limited companies. Many holding companies are also public limited companies, even if they are not traded on a stock exchange – simply because there is more ‘prestige’ associated with public limited companies than with the ‘everyday’ private limited company.

Public limited companies can either be formed ‘from scratch’ or can be converted from private limited companies. In either case there are significant differences with private limited companies, both in terms of how the company is established and because of the special rules that apply only to public limited companies. In general, it is much more expensive and time-consuming to run a public limited company than it is a private limited company, and this is why they are so rarely used as normal trading vehicles.

Differences between public and private limited companies

The main differences between the two types of company are as follows:

• Authorised minimum share capital: A public company cannot start trading until it has received a certificate from the Registrar of Companies stating that it has a share capital of £50,000 or over. A quarter of this has to be paid up, so in principle all public limited companies will have at least £12,500 in capital when they commence trading.
• Public offers of securities: As mentioned above, only a public limited company can offer to sell its shares to the general investing public.
• Name: The words ‘Public Limited Company’ (or ‘Plc’) and ‘Limited’ (‘Ltd’) must be added at the end of the company name.
• Directors: Whilst a private limited company must have at least one director, a public limited company must have at least two at all times.
• Shareholders: Whilst a private limited company must have at least one shareholder, a public limited company must have at least two at all times.
• Company secretary: The company secretary of a public limited company must have appropriate qualifications.
• Miscellaneous: There are a vast number of smaller differences between the two types of company, such as the fact that directors of a public limited company must retire at 70.

In addition, although most company law applies equally to both public and private companies, there is an additional ‘layer’ of law that applies only to public limited companies. For example a public limited company:

• Is severely restricted in the extent to which it can provide financial assistance to a purchaser of its own shares;
• Cannot automatically exclude the statutory requirement to offer new shares first to existing shareholders;
• Cannot use its capital to purchase or redeem its own shares (it must use its profits for this);
• Cannot take advantage of the accounting exemptions for ‘small’, ‘medium sized’ or ‘dormant’ companies; and
• Cannot take shareholder decisions by written resolution rather than calling a general meeting.

Forming A Public Company Limited By Shares

If you have decided to form a public company limited by shares then there are a number of things that you must decide in order to allow us to form the company to your exact requirements.

You can either consider these yourself or discuss some or all of them with us when you come to see us. So it does not matter if you are not sure at the moment what you require; we are very happy to discuss that with you and guide you through the process.

Please click here to see the things to decide or discuss with us.