Nowadays most companies register themselves as a public limited company, this is because of the Public Limited Company Advantages and Disadvantages.
PLC or public limited company is a type of business model in which the public can buy the shares of that company and can become shareholders.
If you are confused about whether to operate your company as PLC or by other means then you should be aware of the advantages and disadvantages related to a public limited company.
In this blog, we will discuss the in-depth public limited company and their advantages and disadvantages.
Table of Contents
What Is a Public Limited Company?
Before jumping into the advantages and disadvantages of a public limited company let’s first take a look into what a public limited company is and what its features are.
Public Limited Company Definition
A public limited company is defined under the Company Act 2013, which states that a public limited company is a company that sells its shares to the public and has limited liabilities.
Anyone either by initial public offering (IPO) or through the stock market exchange can buy the company’s share and can become a shareholder.
A public limited company is bound by tight regulations and has to disclose its financial statements to shareholders.
Initially, companies register themselves as a private limited company.
Still, as they grow they transform themselves into a public limited company, it is because a public limited company can access vast capital by selling its shares to the public.
There are unlimited examples of famous public limited companies however, here are some well-known public limited companies.
- Barclays Plc
- McDonald’s Plc
- Vodafone Group Plc
- Marks & Spencer Group Plc.
- Easyjet Plc.
- J Sainsbury Plc
Features of Public Limited Company
The following are the features of a public limited company.
- A public limited company is a legal entity that can acquire, own, enjoy, and transfer property to its name and ensures that the shareholders are unable to claim property during the business.
- A public limited company enjoys some benefits because it has legal existence under the Companies Act 2013.
- The shares of a public limited company are easily transferable just by signing and submitting a shares transfer form.
- A public limited company has the legal ability to incur depths and have possession of the property because the members of the company are not accountable to the creditors of the company.
A public limited company has its advantages and disadvantages.
If you think that the only advantage a public limited company has is access to vast capital then there is much more to it.
Advantages Of a Public Limited Company
Let’s first start with the advantages of a public limited company.
(i) Capital Can be Raised Easily
The main reason for registering a company as a public limited company is access to capital.
As a public limited company can issue its shares it can get access to good capital, this capital can further be used to conquer potential growth opportunities.
By this, it becomes easier for a registered public limited company to raise and use capital.
(ii) Risk Diversification
When a company is registered as a public limited company it can sell small shares to the public at large, which means that the company can diversify its capital and can avoid any great loss.
If a company invests a larger amount in just one finance instrument then the chances of loss are much greater than diversifying that amount into smaller chunks.
And this is one of the benefits that a public limited company provides.
(iii) Growth Opportunities
A public limited company has great financial potential which is readily available, and because of this, the company can conquer many potential growth opportunities without worrying about the source of capital.
And because this public limited company shows rapid growth when compared to boost your business models.
(iv) Finance Opportunities
A public limited company attracts more investors than any other type of company and this is because of its favorable characteristics like transparency, financial stability, etc.
Also, a public limited company gets loan approvals quicker than a private limited company.
(v) Easy-share Transfer
The shares of a public limited company can be transferred i.e. bought and sold easily, this can be done through a stock market exchange.
Because of the easy transfer of shares a public limited company generates more capital than a private limited company
A public limited company is bound to disclose its financial health to its shareholders and due to this the functioning of a public limited company is very transparent.
Therefore a public limited company is highly praised for its transparency in the field of business.
(vii) Improved Goodwill
When a public limited company is transparent it also improves its goodwill, the abbreviation of PLC at the end of a company’s name adds a certain level of trust to the name of the company.
Once a company is registered as a public limited company it experiences a boost in sales and profit
These were the advantages of a public limited company.
Disadvantages of a Public Limited Company
A public limited company is not all gold, it has some disadvantages as well.
A public limited company may have an upper hand in the capital but it comes with some downsides as well.
Let’s cover the disadvantages of a public limited company.
(i) Unpredictable Stock Market
Everyone knows how volatile the stock market can be, and one of the major capital generators for a public limited company is its stocks.
Therefore, a public limited company can get some whipping if the stock market crashes or dips.
(ii) Strict Regulation
A public limited company is strictly governed by regulations like accounts auditing, transparency, etc.
And if you are running a public limited company then you have to adhere to all the strict regulations.
(iii) Expensive Registration
A public limited company may have the upper hand in capital generation but on the contrary, the registration of a public limited company is an expensive process.
To register your company as a public limited company you have to go through a long procedure and have to invest a lot of time and money.
(iv) Less Confidentiality
As a public limited company believes in providing maximum transparency to its investors, it does have to compromise with the company’s confidentiality.
Also, because of the major involvement of the public, the company is unable to maintain confidentiality even if it tries to.
(v) More Control Over Stakeholders
The shareholder can group up and can attain the power to influence the decisions and strategies of a public limited company.
This at times can negatively affect the functioning of the company.
These were some disadvantages of a public limited company.
These are public limited company advantages and disadvantages.
It is important to note that while registering one’s company as a public limited company one should be well aware of its pros and cons and should balance his decision accordingly.
A public limited company is a popular choice and will remain a good strategy in years to come.