Public Limited Company

Introduction A Public Limited Company (PLC) is one of the most recognized forms of business structures, especially for large enterprises that intend to raise capital from the public. It is a company that offers its shares to the general public through a stock exchange, providing access to a broader investor base, higher capital, and greater market credibility. This article explores the meaning, features, advantages, disadvantages, and process of setting up a public limited company. 1. What is a Public Limited Company? A Public Limited Company (PLC) is a business entity that is registered under a country’s corporate law and is allowed to issue shares to the public. In countries like India and the UK, the “PLC” tag signals that the company is publicly traded and follows strict regulations to protect shareholders. Unlike private limited companies, PLCs have no restrictions on the maximum number of shareholders and can raise capital from the stock market through an Initial Public Offering (IPO). 2. Key Characteristics of a Public Limited Company Feature Description Minimum Shareholders 7 Maximum Shareholders Unlimited Minimum Directors 3 Name Must end with “Limited” or “PLC” Share Transferability Freely transferable Minimum Capital Varies by country (e.g., ₹5 lakh in India) Legal Identity Separate from its owners Public Disclosure High level of transparency required 3. Advantages of a Public Limited Company 3.1 Access to Capital PLCs can raise substantial amounts of capital by issuing shares to the public via stock exchanges. This makes it ideal for funding large-scale operations or expansion. 3.2 Share Liquidity Shares of a public company are freely traded, offering liquidity to investors and ease of buying or selling ownership. 3.3 Enhanced Credibility Being a listed company improves public trust and brand recognition, making it easier to attract partners, clients, and investors. 3.4 Perpetual Succession A PLC continues to exist regardless of changes in its ownership. Shareholder death, exit, or bankruptcy does not impact company continuity. 3.5 Growth and Expansion Large capital, improved visibility, and the ability to reinvest profits help public companies expand rapidly across domestic and international markets. 4. Disadvantages of a Public Limited Company 4.1 Regulatory Burden PLCs must comply with strict legal and regulatory frameworks, including audits, disclosures, and stock exchange rules. 4.2 Loss of Control Founders often lose a significant portion of control as shares are sold to outside investors and institutional stakeholders. 4.3 Market Pressure Public companies face constant pressure to perform financially, meet quarterly earnings expectations, and maintain shareholder satisfaction. 4.4 High Setup and Maintenance Costs Going public involves high initial costs for IPO, legal consultation, compliance, and ongoing operational expenses. 5. Steps to Register a Public Limited Company Step 1: Obtain Digital Signatures and DIN Step 2: Name Reservation Step 3: Draft Incorporation Documents Step 4: Apply for Incorporation Step 5: Certificate of Incorporation Step 6: Apply for Business Licenses and PAN/TAN Step 7: File for IPO (if applicable) 6. IPO and Stock Market Listing A major feature of a Public Limited Company is the ability to go public. The company sells its shares to the public in return for investment capital. Here’s how the process works: Step 1: Appoint Lead Managers and Underwriters Investment banks and advisors help with pricing and marketing. Step 2: Draft Prospectus The company files a draft red herring prospectus (DRHP) detailing its business, financials, risks, and objectives. Step 3: Get Regulatory Approval Submit the prospectus to the securities regulator (like SEBI in India or SEC in the US) for approval. Step 4: Roadshows and Marketing The company promotes the IPO to investors and institutions. Step 5: IPO Launch and Share Allotment Shares are listed on the stock exchange after successful subscription and allotment. 7. Compliance Requirements of a Public Limited Company PLCs must maintain high standards of transparency and disclosure, including: Non-compliance can result in penalties, suspension, or delisting. 8. Taxation Public limited companies are subject to corporate tax in their jurisdiction. In India (FY 2024-25): In the US: Proper accounting, tax planning, and auditing are essential. 9. Examples of Public Limited Companies These companies operate at a global scale and are publicly traded on national and international exchanges. 10. Private vs. Public Limited Company Feature Private Ltd Company Public Ltd Company Shareholders 2–200 Minimum 7; No max Capital Limited access Raise via IPO Share Transfer Restricted Freely transferable Listing Not allowed Listed on stock exchange Disclosure Low High (public filings) Governance Less formal Strict corporate governance Conclusion A Public Limited Company is the ideal business structure for large enterprises that want to raise capital, expand operations, and gain public trust. While it brings unmatched visibility and funding opportunities, it also demands higher regulatory compliance, transparency, and accountability. Entrepreneurs must evaluate whether the benefits of going public align with their long-term vision, resources, and governance capacity. Many successful businesses began as private limited companies and converted to public limited companies as they scaled.