Public Limited Company (PLC) : Pros & Cons

What Is a Public Limited Company (PLC)?

A public limited company (PLC) is a public company in the United Kingdom. PLC is the equivalent of a U.S. publicly traded company that carries the Inc. or corporation designation. The use of the PLC abbreviation after the name of a company is mandatory and communicates to investors and to anyone dealing with the company that it is a publicly traded corporation.

How a Public Limited Company (PLC) Works

A PLC designates a company that has offered shares of stock to the general public. The buyers of those shares have limited liability. Meaning, they cannot be held responsible for any business losses in excess of the amount they paid for the shares.

In the U.K., a PLC operates along similar lines as a public corporation in the U.S. Its operations are regulated and it is are required to publish periodic reports to shareholders and prospective shareholders on its true financial health.

Requirements for a PLC

U.K. company law says that a PLC must have the PLC designation after the company name and minimum share capital of £50,000. Like a publicly traded company in the U.S., 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 U.S. corporations.

Cumulative preference shares are akin to preferred stock in the U.S. Other key requirements for a PLC include offering shares, appointing directors, and adhering to registration requirements. The PLC must also have PLC or public limited company as part of the name. 

Advantages and Disadvantages of a PLC

The biggest advantage of forming a public limited company (PLC) is that it grants the ability to raise capital by issuing public shares. A listing on a public stock exchange attracts interest from hedge funds, mutual funds, and professional traders as well as individual investors. That tends to lead to increased access to capital for investment in the company than a private limited company can amass.

The largest PLCs make up the Financial Times Stock Exchange 100 Index, known as the Footsie.

On the other hand, there's much more regulation for a PLC in the U.K., as there is for a pubic corporation in the U.S. They are required to hold annual general meetings open to all shareholders and are held to higher standards of transparency in accounting. Because they’re public, they’re also vulnerable to pressure from shareholders and takeover bids from rivals.

By becoming a PLC, the company is given greater access to capital, and shareholders are offered liquidity. These are similar benefits of a company in the U.S. going public. On the downside, becoming a PLC means more scrutiny and required reporting. The company will have more shareholders and the value of the company could become more volatile as it is determined by the financial markets. 

Public Limited Company (PLC) vs. Private Limited Company (LTD)

A PLC is a public company in the U.K. Meanwhile, there are private limited companies (LTDs), which are private companies in the U.K. 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 U.K. 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.

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 March 2021, included Unilever, HSBC, and AstraZeneca.

Royal Dutch Shell, HSBC Holdings, BP, GlaxoSmithKline, and British American Tobacco. 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.

Public Limited Company (PLC) FAQs

What Does It Mean to Be a Public Limited Company (PLC)?

A PLC is a publicly traded company in the U.K. These companies must have PLC or the words "public limited company" after its name. For example, the oil and gas company, BP plc, is a U.K. 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 and shares where shares can be openly bought or sold by individuals, companies, mutual funds, etc.

What Are the Main Features of a PLC?

The key feature of a PLC is that it's based in the U.K. and be 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 U.K. 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.

Bottom Line

A PLC is the equivalent of an Inc. or corp. company that trades in the U.S. PLCs are publicly traded companies in the U.K. Many famous U.K.-based companies are publicly traded and have the PLC designation after its name, such as consumer goods company Unilever plc and drugmaker AstraZeneca plc.