Advantages and Disadvantages of public limited company

A public limited company is a form of a large business setup which provides the shares to the general public and has a limited liability.

There are a host of benefits in the formation of a public limited company (or PLC) which many businesses choose to incorporate instead of other forms such as the sole trader, limited liability partnership (LLP), partnership or company limited by guarantee. Meanwhile many companies limited by shares are formed as private companies, you may get to know through this article about the advantages and disadvantages of a public limited company. In addition to setting up a new company, a proper assessment of the advantages and disadvantages of a public limited company will be required for an existing private limited company to get converted into a public limited company.

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What is a public limited company?

A public limited company is a form of a large business setup which provides the shares to the general public and has a limited liability. The shares of a PLC can be acquired by anybody, either privately, during an initial public offering, or through stock market trading. In PLC, the company raises the capital by selling off the shares to the investors in order to infuse the capital into their business. Closely regulated, such shares can be listed or unlisted on a stock exchange, with the company publishing their finances on a frequent basis which ensures the actual worth of the stock to the shareholders.

Advantages of public limited company

Why public limited company is great ?


Bringing more capital through the public issue of shares

  • PLC set up companies raise capital to the general public which encourages them to participate in the company by being a shareholder which offers a valuable option of procuring sources of funds.
  • Increase in the likelihood of raising potential funds from hedge funds, mutual funds and other institutional traders on being listed on a stock exchange.
bring more capital gain
established business

Spreading of risks

  • More opportunities for the general public to buy the shares in the PLC which spreads the risk of company ownership among a large number of shareholders.
  • Since the ownership of the management is spread out to many people from the general public instead of solely relying on one or two angel investors as most of the PLC companies prefer to opt to accelerate the growth.
  • In some cases, founders may not be comfortable with angel investing as it could impede the level of influence over the company’s direction which otherwise that they want to take.

Other finance opportunities available

  • A PLC company has greater chances to obtain the potential sources of finance available in the market. Having listed on a stock exchange helps to improve the creditworthiness of the company at the time of issuing corporate debt (and hence narrows down the return the company needs to offer its investors).
  • Having a listed PLC company encourages banks and other financial institutions to extend the finance available on favorable interest rates and repayment terms on loans. This raises the negotiation power of the company for getting better interest rates from banks and FIs.
established business

established business

Opportunities for growth and expansion

Securing finance opportunities through shares and with less risk in spreading out the ownership management, the PLC has a valuable chance:

  • In chasing new projects, new products or new markets.
  • In making the capital expenditure to enhance and support the business.
  • In making acquisitions either in cash or by providing shares to the target business shareholders.
  • To become actively involved in fund research and development activities.
  • In settling off existing debt or substituting existing debt with new debt on favourable terms.
  • Grow organically.

Builds up prestigious profile and confidence

  • Adding ‘PLC’ letters at the end of your company’s name brings prestige and grandeur to your company. This captures the attention of your future customers, employees and suppliers to view your business more positively and also having listed on a stock exchange.
  • It can build up free publicity with the media paying more attention to such businesses.
established business

Disadvantages of public limited company

Drawbacks of Public limited company ?


Greater regulatory requirements

  • Running your company as a PLC calls for strict regulatory requirements. Your company needs to follow the stringent discourse and filing requirements for the London Stock Exchange, and to maintain up-to-date with such requirements on a frequent basis.
  • Your company running as a PLC need to have at least two company directors along with a company secretary on board.
established business

established business

Heavy initial financial obligation

  • Running your company as a PLC needs to have at least £50,000 of nominal share capital, in addition to, at least 25% of which is paid up.
  • This would be much heavier in terms of the financial requirements of a private company, with additional costs coming up from legal and investment professionals guiding you on your listing process.

Higher transparency levels needed

  • Shareholders need to get frequent updates in order to know the performance of their stocks in which they’ve invested. These reports must be produced within 6 months at the end of the financial year.
  • Annual general meetings must also be conducted which expresses your accountability to maximum people than before.
  • Broadly speaking, public limited companies are held to account and more rigorously investigated by the auditors.
established business

established business

More susceptible to takeovers

  • With the spreading of risk, your company becomes more susceptible to takeovers. This is specifically important if most of the shareholders give their consent to a takeover bid.
  • It’s much difficult to take the controlling charge to decide who could be the shareholder of your company and there lies a possibility of losing the course of directing your business from your own hands.