Public limited company
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A public limited company (legally abbreviated to plc with or without full stops) is a limited liability company that sell shares to the public in United Kingdom company law, in the Republic of Ireland and other Commonwealth jurisdictions. It can be either an unlisted or listed company on the stock exchanges. In the United Kingdom, a public limited company usually must include the words "public limited company" or its abbreviation "plc" at the end and as part of its legal company name. However, certain public limited companies (mostly nationalised concerns) incorporated under special legislation are exempted from bearing any of the identifying suffixes.
When a new company incorporates in England and Wales or in Scotland, it must register with Companies House, an Executive Agency of the Department for Business, Innovation and Skills. Northern Ireland has a separate Registrar of Companies. In the Republic of Ireland the equivalent executive agency is the Companies Registration Office, Ireland. In Malta a firm will register with the Malta Financial Services Authority (MFSA).
While it is not compulsory for a public limited company to offer its shares to the public (some plc's are privately owned, maintaining the "plc" designation for the extra financial status), many do so, and their shares are usually traded on either the London Stock Exchange or the Alternative Investments Market. Irish public limited companies usually trade on the Irish Stock Exchange, though many also list on the London Stock Exchange, or more rarely, the Alternative Investments Market.
Formation of a public limited company requires a minimum of two directors (differing from country to country: in India seven directors are required). In general terms anyone can be a company director, provided they are not disqualified on one of the following grounds:
- in the case of "plc's" or their subsidiaries, the person is over 70 years of age or reaches 70 years of age while in office, unless they are appointed or re-appointed by resolution of the company in general meeting of which special notice has been given.
- the person is an undischarged bankrupt, or disqualified by a Court from holding a directorship, unless given leave to act in respect of a particular company or companies.
- in England and Wales (as of October 2008; Companies Act 2006) and in Scotland (Age of Legal Capacity (Scotland) Act 1991), the person is under 16 years old.
Some people who are not British or European Union citizens are restricted as to what work they may do while in the UK, which may exclude them from being a director.
The secretary (or each joint secretary) of a public limited company must also be a person who appears to the directors to have the necessary knowledge and ability to fulfil the functions and who:
- Held the office of secretary or assistant or deputy secretary on 22 December 1980, or
- For at least three of the five years before their appointment, held the office of secretary of a non-private company or
- Is a barrister, advocate or solicitor called or admitted in any part of the United Kingdom, or
- Is a person who, by virtue of his or her previous experience or membership of another body, appears to the directors to be capable of discharging the functions of secretary, or
- Is a member of any of the following bodies:
- The Institute of Chartered Accountants in England and Wales,
- The Institute of Chartered Accountants of Scotland,
- The Institute of Chartered Accountants in Ireland,
- The Institute of Chartered Secretaries and Administrators,
- The Association of Chartered Certified Accountants,
- The Chartered Institute of Management Accountants (formerly known as the Institute of Cost and Management Accountants), or
- The Chartered Institute of Public Finance and Accountancy.
The members must agree to take some, or all, of the shares when the company is registered. The memorandum of association must show the names of the people who have agreed to take shares and the number of shares each will take. These people are called the subscribers.
There is a minimum share capital for public limited companies: Before it can start business, it must have allotted shares to the value of at least £50,000. A quarter of them, £12,500, must be paid up. Each allotted share must be paid up to at least one quarter of its nominal value together with the whole of any premium.
A company can increase its authorised share capital by passing an ordinary resolution (unless its articles of association require a special or extraordinary resolution). A copy of the resolution – and notice of the increase on Form 123 – must reach Companies House within 15 days of being passed. No fee is payable to Companies House.
A company can decrease its authorised share capital by passing an ordinary resolution to cancel shares which have not been taken or agreed to be taken by any person. Notice of the cancellation, on Form 122, must reach Companies House within one month. No fee is payable to Companies House.
A company may have as many different types of shares as it wishes, all with different conditions attached to them. Generally share types are divided into the following categories:
- Bearer shares – Are a legal instrument denoting company ownership, and are usually in the form of share warrants. A share warrant is a document which states that the bearer of the warrant is entitled to the shares stated in it. If authorised by its articles, a company may convert any fully paid shares to "share warrants". These warrants are easily transferable without any need for a transfer document; that is, they can simply be passed from hand to hand. When share warrants are issued, the company must strike out the name of the shareholder from its register of members and state the date of issue of the warrant and the number of shares to which it relates. Subject to the articles, a share warrant can be surrendered for cancellation. If so, the holder is entitled to be re-entered into the register of members. Vouchers are usually issued with the share warrants in order that any dividends may be claimed.
- Cumulative preference – These shares carry a right that, if the dividend cannot be paid in one year, it will be carried forward to successive years.
- Ordinary – As the name suggests these are the ordinary shares of the company with no special rights or restrictions. They may be divided into classes of different value.
- Preference – These shares normally carry a right that any annual dividends available for distribution will be paid preferentially on these shares before other classes.
- Redeemable – These shares are issued with an agreement that the company will buy them back at the option of the company or the shareholder after a certain period, or on a fixed date. A company cannot have redeemable shares only.
A "plc" has access to capital markets and can offer its shares for sale to the public through a recognised stock exchange. It can also issue advertisements offering any of its securities for sale to the public. In contrast, a private company may not offer to the public any shares in itself.
Most UK Companies are now formed electronically via Company Formation Agents.
The following documents, together with the registration fee are sent to the Registrar of Companies:
- Memorandum of Association – this sets out the company name, the registered office address and the company objects. The object of a company may simply be to carry on business as a general commercial company. The company's memorandum delivered to the Registrar must be signed by each subscriber in front of a witness who must attest the signature. It is often referred to as the 'charter of a company' or 'constitution of the company'. The signatories to the Memorandum of Association are deemed to be the first Directors of the company. The Memorandum defines the relation of members with the rest of the world.
- Articles of Association – this is the document which sets out the rules for the running of the company's internal affairs. The company's articles delivered to the Registrar must be signed by each subscriber in front of a witness who must attest the signature. The Articles define the inter-management, inter-member and inter-employee relationship.
- Form 10 – this gives details of the first director(s), secretary and the intended address of the registered office. As well as their names and addresses, the company's directors must give their date of birth, occupation and details of other directorships they have held within the last five years. Each officer appointed and each subscriber (or their agent) must sign and date the form.
- Form 12 – this is a statutory declaration of compliance with all the legal requirements relating to the incorporation of a company. It must be signed by a solicitor who is forming the company, or by one of the people named as a director or company secretary on Form 10. It must be signed in the presence of a commissioner for oaths, a notary public, a justice of the peace or a solicitor. There is usually a £5 fee payable to the person that witnesses the statuary declaration.
The key difference with the paper process is that there is no Form 12 and requirement for a statutory declaration. This significantly speeds the process and Companies House's record for an Electronic Company formation is 100 years.
Because the electronic process requires compatible software that works with Companies House eFiling service, companies are usually formed through a Company Formation Agent.
A company's first accounts must start on the day of incorporation. The first financial year must end on the 'accounting reference date' or a date up to seven days either side of this date. Subsequent accounts start on the day following the year-end date of the previous accounts. They end on the next 'accounting reference date' or a date up to seven days either side.
To help you meet this filing requirement, the Companies House send a pre-printed 'shuttle' form to your registered office a few weeks before the anniversary of incorporation. This will show the information that you have already given to the Companies House. If your accounts are delivered late, there is an automatic penalty. This is between £500 and £5,000 for a plc. The first accounts of a public limited company (plc) must be delivered:
- if the accounting reference period is more than 12 months, within 19 months of the date of incorporation, or three months from the end of the accounting reference period, whichever is longer or
- within seven months of the end of the accounting reference period.
You may change the accounting reference day by sending Form 225 to the Registrar. You must do this during the accounting period affected by the change or during the period allowed for delivering the associated accounts to the Companies House. For more information, see the booklet, 'Accounts and Accounting Reference Dates'.
Every company must deliver an annual return to Companies House at least once every 12 months. It has 28 days from the date to which the return is made up to do this.
To help companies meet this filing requirement, Companies House send a pre-printed 'shuttle' form to their registered office a few weeks before the anniversary of incorporation.
All the company has to do is:
- check that the details are still correct,
- amend any that are not, and,
- send the form back, signed and dated, within 28 days of the date of the return which is shown on the front of the form.
There is an annual document-processing fee of £30 (or £15 for users of the Electronic Filing or WebFiling services), which must be sent to Companies House with the annual return.
Conversion of a private limited company to a public limited company
Both a private company limited by shares and an unlimited company with a share capital may re-register as a plc., but a company without a share capital cannot do so.
A private company must pass a special resolution that it be so re-registered and deliver a copy of the resolution together with an application form to the Registrar. The resolution must also:
- alter the company's memorandum so that it states that the company is to be a public limited company,
- increase its share capital to the statutory minimum of £50,000,
- make any other alterations to the memorandum so that it conforms to that required for a public limited company,
- make any required alterations to the articles of association of the company.
The private company if it does not already have sufficient issued share capital must issue £50,000 in shares a minimum of 25% part paid.
Conversion of a public limited company to a private limited company
In some jurisdictions a public limited company may re-register as a private limited company or private unlimited company at any time with few formalities.
A court may also order a public company to re-register as private on approving a 'minute of reduction' of share capital which results in the issued share capital falling below the statutory minimum. In such a case the court will also specify alterations to the company's memorandum and articles. A special resolution to re-register is not required.