Public limited company (PLC) in the UK, often abbreviated as PLC, signifies a publicly traded company. Similar to publicly traded corporations in the US, the “PLC” designation is mandatory and indicates that the company offers shares to the public. In this article, we explore what PLC means, how it operates, its advantages and disadvantages, key requirements, and differences from private limited companies (LTDs). Additionally, we’ll discuss how to invest in PLCs and provide examples of well-known PLCs in the UK.
Public limited company (PLC) is a term frequently encountered in the UK’s corporate landscape. If you’re wondering what this abbreviation means and how it affects businesses and investors, you’re in the right place. In this article, we’ll delve into the world of PLCs, their functions, advantages, and drawbacks, shedding light on an essential aspect of the UK’s business environment.
What does PLC mean?
In the United Kingdom, a public limited company (PLC) is equivalent to a publicly traded company in the US, indicated by the “Inc.” or “Corporation” designation. The use of “PLC” after a company’s name is mandatory and serves as a clear signal to investors and business partners that it’s a publicly traded corporation.
How a public limited company (PLC) works
A PLC represents a company that has offered shares to the general public. Investors who buy these shares enjoy limited liability, meaning their responsibility for business losses is capped at the amount they invested in shares.
In the UK, PLCs operate similarly to public corporations in the US. They are subject to regulation and must regularly report their financial health to shareholders and potential investors.
Requirements for a PLC
According to UK company law, a PLC must have the PLC designation after the company name and a minimum share capital of £50,000. Like publicly traded companies in the US, PLCs offer various types of shares, such as ordinary and cumulative preference shares. Ordinary shares of a PLC are similar to common stock issued by US corporations, while cumulative preference shares are akin to preferred stock in the US. Other key requirements for a PLC include offering shares, appointing directors, and adhering to registration requirements.
Pros and Cons
Here is a list of the benefits and drawbacks to consider.
- Ability to raise capital by issuing public shares.
- Access to a wide range of investors, including institutional and retail.
- Increased liquidity for shareholders.
- Greater scrutiny and regulation.
- Accountability to a larger number of shareholders.
- Increased volatility due to market influence.
Public limited company (PLC) vs. private limited company (LTD)
A PLC is a public company in the UK, while there are private limited companies (LTDs), which are private companies in the UK. Shares of a private limited company are not offered to the general public. Private companies are still incorporated, generally with the Companies House. These companies are still required to have legal documents to form the business. Private companies must have at least one director. To raise capital via a public investment in the UK, the company must be a PLC. PLCs are like LTDs, except they are publicly traded, with shares that can be freely sold and traded on a stock exchange. Meanwhile, PLCs must have at least two directors and hold annual shareholder meetings.
How to invest in a PLC
As public companies, any retail investor in the United Kingdom can buy shares in a PLC. The simplest way to do so is through a brokerage: The investor can simply create an account, transfer money, and buy shares of the company. It is also possible to buy shares through a retirement account, so some people may own PLC shares without even knowing about it. This may be more complicated for investors outside the United Kingdom. Many U.S. brokerages allow their clients to directly buy shares in foreign markets, exchanging dollars into local currency to make the purchase. In addition, many UK companies are tradable in American markets in the form of American depositary receipts. The downside is that the investor would assume an additional level of currency risk.
Examples of PLCs
All of the companies listed on the London Stock Exchange are, by definition, PLCs. The fashion 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 Footsie is comparable to the Dow Jones Industrial Average (DJIA) in the U.S. The biggest PLCs by market capitalization in the Footsie, as of July 2022, included Shell, HSBC, and AstraZeneca.4 The formal names of all of these companies include the PLC designation. Not all PLCs are listed on a stock exchange. A company may choose not to list on an exchange or may not meet the requirements for listing.
What does it mean to be a public limited company (PLC)?
A PLC is a publicly traded company in the UK. These companies must have PLC or the words “public limited company” after their name. For example, the oil and gas company, BP plc, is a UK publicly traded company that’s headquartered in London, England.
Who is a public limited company owned by?
Like publicly traded companies headquartered in the U.S., PLCs are owned by shareholders. These companies are traded on exchanges where shares can be openly bought or sold by individuals, companies, and mutual funds. This listing contrasts with the limited (Ltd.) listing which does not trade publicly and has limitations on shares and shareholders.
What are the main features of a PLC?
The key feature of a PLC is that it’s based in the UK and is publicly traded. The company must also have the PLC or “public limited company” designation after its name.
What is the difference between a public and private limited company?
A PLC is a publicly traded company, while a private limited company is also a UK company, except it is private. There are other notable differences between the two, such as the fact that a private limited company only has to have one director, while a PLC must have two.
The bottom line
A PLC is the equivalent of an Inc. or Corp. company that trades in the U.S. stock market. PLCs are publicly traded companies in the UK. Many famous UK-based companies are publicly traded and have the PLC designation after their name, such as consumer goods company Unilever plc and drugmaker AstraZeneca plc.
Frequently asked questions
What is a public limited company (PLC) in the UK?
A public limited company (PLC) in the UK is a type of business entity that is publicly traded on stock exchanges. It is legally required to have “PLC” or “public limited company” in its name, signaling that it offers shares to the general public.
How does a PLC differ from a private limited company (LTD)?
The primary distinction between a PLC and a private limited company (LTD) lies in their ownership and trading of shares. A PLC can offer its shares to the public and is subject to more extensive regulatory requirements, while an LTD cannot offer shares to the public and has fewer reporting obligations.
What are the advantages of being a PLC?
Being a PLC offers several advantages, including the ability to raise capital by selling shares to a wide range of investors. It provides increased liquidity for shareholders, making it easier to buy and sell shares. PLCs also gain visibility in the financial market, attracting potential investors.
What are the disadvantages of being a PLC?
While PLCs enjoy many benefits, they also face drawbacks. They are subject to greater scrutiny and regulation, which can be costly and time-consuming. PLCs must be accountable to a larger number of shareholders, and their stock prices can be more volatile due to market influences.
Can anyone invest in a PLC?
Yes, anyone, including retail investors, can invest in a PLC. In the UK, you can purchase PLC shares through brokerage accounts or retirement accounts. For investors outside the UK, many US brokerages allow investment in foreign markets, and some UK companies offer American depositary receipts (ADRs) in US markets.
What are the key features of a PLC?
The main features of a PLC include its status as a publicly traded company in the UK, the requirement to have “PLC” or “public limited company” in its name, and the ability to offer shares to the public.
What is the significance of the FTSE 100 index for PLCs?
The FTSE 100, often called the Footsie, is an index comprising the 100 largest PLCs listed on the London Stock Exchange. It serves as a benchmark for the UK’s stock market performance and reflects the economic health of the country. Being part of the FTSE 100 is prestigious for PLCs and attracts investor attention.
How do PLCs raise capital?
PLCs raise capital by issuing shares to investors in the open market. When individuals or institutions buy these shares, they provide capital to the company. PLCs can also issue different types of shares, such as ordinary shares and preference shares, to diversify their funding sources.
What are the reporting requirements for PLCs?
PLCs have stringent reporting obligations. They must regularly disclose their financial performance, including financial statements, to shareholders and regulatory authorities. These reports ensure transparency and accountability to investors and the public.
Are all PLCs listed on stock exchanges?
No, not all PLCs are listed on stock exchanges. While being listed provides access to public capital, some PLCs may choose not to list or may not meet the listing requirements of stock exchanges. They may operate as unlisted PLCs.
What role do shareholders play in a PLC?
Shareholders in a PLC own a portion of the company and have voting rights in important decisions. They elect the board of directors, approve major corporate actions, and can voice their concerns or suggestions at annual general meetings.
- PLC, or public limited company, is a designation for publicly traded companies in the UK.
- All companies listed on the London Stock Exchange are PLCs.
- Investors can purchase shares in PLCs.
- PLCs must disclose financial data and adhere to reporting regulations.
- Many prominent UK brands, such as Burberry and Shell, include “PLC” in their formal names.