Definition
A Public Limited Company (PLC) is a type of corporation headquartered in the United Kingdom, Ireland, and other countries that adhere to common law traditions. It’s legally able to offer its shares to the general public and has limited liability, meaning the owners are not personally liable for the company’s debts. This type of company requires a minimum share capital, and its shares may be listed and traded on a stock exchange.
Phonetic
Public Limited Company (PLC): /ˈpʌb.lɪk ˈlɪm.ɪ.tɪd kəmˈpʌ.ni/ (PLC): /ˌpiː el ˈsiː/
Key Takeaways
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- Public Limited Company (PLC) is a company that is allowed to offer its shares to the public. These shares can be freely traded and sold on a stock exchange, providing a way for the company to raise capital from a wide range of investors.
- PLCs have a significant advantage in terms of limited liability. This means that shareholders of a PLC are only liable for the amount they have invested in the company and not for the total debts of the company in case of insolvency.
- A PLC’s financial information, including profits, losses, and assets, is publicly available. This transparency can attract investors, but it also means that the company is subject to regulation and scrutiny from government agencies and the public.
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Importance
The term Public Limited Company (PLC) is an essential component of business and finance as it describes a company that has offered shares to the general public, either on the stock market or through some other means. PLCs have the advantage of being able to raise capital more easily through public securities and have the potential for large scale operations. It also fosters transparency and accountability because they are subject to stringent regulations and must disclose financial and operational information to the public. Therefore, understanding PLC is crucial for investors, stakeholders, and business professionals to make informed decisions.
Explanation
A Public Limited Company (PLC) is a prevalent business model that serves a significant purpose in the economic sphere. It’s distinguished for its ability to offer its shares to the public, either through the open market or via issuance of new shares. This ability to raise capital through public funding opens up a vast sea of possibilities for growth, expansion, and making massive investments. Additionally, the shares of a PLC are freely transferable, providing liquidity for investors and thereby attracting a larger pool of potential shareholders.Moreover, a PLC is often used as a vehicle for risk distribution. By offering shares to the public, the financial risk associated with the company’s operations is spread amongst a large number of shareholders rather than being shouldered by a single individual or a small group of partners. In addition to this, the entities classified as PLCs often have an elevated status in the business world. They are perceived as more reliable and transparent due to the rigorous regulatory requirements and scrutiny they face, which include the obligation to disclose a substantial amount of information to the public. Therefore, they are often more capable of attracting high-quality employees and forging lucrative partnerships.
Examples
1. British Petroleum (BP) PLC: BP is one of the world’s largest petroleum and petrochemicals companies. It is a publicly traded company listed on the London Stock Exchange, with shares available for public investors to buy. Being a public limited company allows BP to raise significant funding for capital investments and operations.2. Tesco PLC: Tesco is one of the world’s leading multinational grocery and general merchandise retailers, headquartered in the United Kingdom. As a PLC, it is able to raise funds by selling shares on the open market to expand its business operations across the globe.3. Unilever PLC: Unilever is a multinational consumer goods company with products available in over 190 countries. It is a public limited company listed on the London and the Amsterdam Stock Exchange. Unilever’s PLC status provides a broad capital base, helping them to finance numerous acquisitions and expand their brand portfolio globally.
Frequently Asked Questions(FAQ)
What is a Public Limited Company (PLC)?
A Public Limited Company (PLC) is a company that is allowed to offer its shares to the public. It is generally listed on a stock exchange and has limited liability, meaning the financial responsibility of shareholders is limited to their shares.
How is a PLC formed?
A PLC is formed under legal procedures that include registering with a suitable corporate regulatory authority, having a memorandum of association, articles of association, and fulfilling minimum share capital requirements.
What are the advantages of a PLC?
A PLC can have numerous advantages including the ability to raise large amounts of capital, a separate legal identity, limited liability for shareholders, and the ability to buy and sell shares on the open market.
Are there any disadvantages to being a PLC?
Yes, there could be some disadvantages such as increased scrutiny and regulatory requirements, potential loss of control if a large number of shares are sold, the cost and effort of audits and public reporting, and the overall costs of setting up a PLC.
Are PLC shareholders liable for the company’s debts?
No, shareholders of a PLC are not personally liable for the company’s debts. Their liability only extends to the amount they’ve invested in their shares.
Can any business become a PLC?
No, not every business can become a PLC. There are certain stipulated criteria that must be fulfilled. These include a minimum share capital requirement, and the company must have at least two shareholders, two directors, and a qualified company secretary.
What is the difference between a PLC and a private limited company?
The main difference is that a PLC shares can be bought and sold by the public and they can be listed on the stock exchange, while a private limited company’s shares can only be sold or transferred privately and are not available to the public.
How is a PLC regulated?
PLCs are regulated by various entities including corporate regulatory authorities like the Securities and Exchange Commission in the U.S. or the Financial Conduct Authority in the U.K. They are also subjected to industry-specific regulations.
What are some examples of Public Limited Companies?
Some prominent examples of PLCs include Microsoft Corporation, Amazon.com Inc., Tesco PLC, and Royal Dutch Shell PLC.
: Are the directors of a PLC personally liable?
: No, the directors of a PLC are typically not personally responsible for the company’s debts unless it can be shown that they acted illegally, irresponsibly or with gross negligence.
Related Finance Terms
- Share Capital
- Stock Exchange Listing
- Corporate Governance
- Shareholders’ Equity
- Articles of Association
Sources for More Information
