Public Limited Company - PLC

What is a 'Public Limited Company - PLC'

A public limited company (PLC) is the legal designation of a limited liability company (LLC) that has offered shares to the general public and has limited liability. A PLC's stock is offered to the general public and can be acquired by anyone, either privately, during an initial public offering or through trades on the stock market.

BREAKING DOWN 'Public Limited Company - PLC'

The name PLC is more commonly used in the United Kingdom and some Commonwealth countries, as opposed to "Inc." or "Ltd.," which are the norm in the United States and elsewhere. The mandatory use of the PLC abbreviation after the name of the company serves to instantly inform investors, or anyone dealing with the company, that the company is public and probably fairly large.

PLCs can be listed or unlisted on a stock exchange. Like any other major entity, they are strictly regulated and are required to publish their true financial health so shareholders (and future stakeholders) can size up the true worth of their stock. The life span of a PLC is not determined by the death of shareholder. 

Forming a PLC

Originally, a PLC is formed like any other company. Two or more people are required to form it, and it is constituted by the filing of articles of association that describe its purpose, membership and capital. A limited company grants limited liability to its shareholders and, to a lesser extent, its management.

Being a public company allows a business to sell shares to investors in order to raise capital. Only PLCs may be listed on the London Stock Exchange and have the suffix PLC on their ticker symbol. Several other requirements must be met to obtain and maintain the listing: the PLC must be registered as a public company, it must have at least £50,000 authorized share capital, and it must meet ongoing disclosure and filing requirements of the stock exchange.

Examples of PLCs

All companies listed on the London Stock Exchange (LSE) are, by definition, PLCs. For example, the oil company British Petroleum is formally called BP PLC, clothing and accessory retailer Burberry is Burberry Group PLC, and 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 FTSE is comparable to the Dow Jones index in the United States.

Not all PLCs are listed on a stock exchange, therefore even if a company uses the PLC suffix in its name, it does not necessarily mean it is listed. Rather, it means that it meets the other requirements but has chosen not to be traded on a stock exchange or does not otherwise meet the requirements for being listed on an exchange.

Advantages of a PLC

The biggest advantage of forming a PLC is, obviously, the ability to raise capital by issuing public shares. Selling shares to the public means anyone can invest in the company, meaning more capital can be amassed than a private limited company. Being listed on an exchange can also attract interest and investment from hedge funds, mutual funds and other traders. Being a PLC also means that the risk is spread out. By allowing the people the ability to buy shares means they’re also buying into the risk. it also means that there’s big potential for growth and expansion, so PLCs can pursue new projects, buy more products, pay off debt and fund R&D. 

Disadvantages of a PLC

But with the positives, there are also negatives. Being a PLC means there is more regulation, which can be burdensome for some corporations. You need to have at least two directors, there must be higher transparency when it comes to accounting and PLCs must hold annual general meetings (AGMs). Furthermore, because they’re public, they’re vulnerable to takeovers and require a higher initial financial contribution.