A public limited company is a kind of business entity that sells equity to the public through an exchange. In other words, it is a form of a company whose shares can be traded in the general market and can be owned by anyone. Features of public limited company separate from other forms of business and defining these characteristics is essential in the eyes of business enthusiasts or investors. The advantages are that public limited companies can raise funds from the public. Disadvantages include the regulations and scrutiny of the shareholder.
What is Public Limited Company?
A public limited company (PLC) is a company whose shares are freely traded on the stock exchange. This type of business allows members of the public to purchase shares and become part owners of the company. PLCs must comply with strict regulations to ensure transparency, accountability, and fairness to all shareholders. A key feature is that it can raise capital by issuing shares to the public.
The primary advantage of a public limited company is its ability to raise a significant amount of capital through the sale of shares. This enables large-scale business operations and growth. Public limited companies are typically large businesses, such as multinational corporations, that need substantial funding for expansion and other corporate activities.
An example of a Public Limited Company in India is Tata Consultancy Services (TCS). TCS is one of the largest IT services and consulting firms in India, and its shares are publicly traded on the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). As a public limited company, TCS adheres to strict regulatory compliance, including quarterly financial disclosures and annual reports, and allows the general public to buy and sell its shares. This structure enables TCS to raise significant capital, contributing to its extensive global operations and business growth.
Features of Public Limited Company
The features of public limited company are what make this type of organization unique in the corporate world. These features also influence its structure, management, and financial operations. Some of the key features of a public limited company include:
- Ownership through Shares: The ownership of a public limited company is divided into shares. Shareholders can buy and sell shares in the company, giving them ownership rights in proportion to their shareholding.
- Limited Liability: Shareholders in a public limited company have limited liability. This means that if the company goes bankrupt or faces financial issues, the shareholder’s assets are not at risk. They are only liable to the extent of their investment in the company.
- Raising Capital: One of the major features of public limited companies is their ability to raise large amounts of capital by issuing shares to the public. This capital can be used for business expansion, acquisitions, research and development, and other corporate purposes.
- Shareholder Structure: Public limited companies have a diverse shareholder base. Shareholders can range from individual investors to institutional investors like banks, pension funds, and mutual funds. The company’s shares are traded on public stock exchanges, such as the BSE or NSE.
- Regulated by Authorities: Public limited companies are heavily regulated by government authorities and stock exchange rules. They must comply with corporate governance standards, disclose financial information, and provide annual reports to the public.
- Public Disclosure: Transparency is a core principle of public limited companies. They are required to disclose their financial information, operations, and plans to shareholders and the public. This information is available through quarterly earnings reports, annual general meetings, and public filings.
- Perpetual Succession: The company’s existence is not affected by changes in ownership or management. Even if shareholders buy or sell their shares, the company continues to exist and function as a separate legal entity.
- Profit Distribution: Public limited companies may distribute profits to shareholders in the form of dividends. The amount of dividends is determined by the company’s profitability and the decisions made by the board of directors.
- Management: The management of a public limited company is separate from its ownership. Shareholders elect a board of directors to oversee the company’s operations. The directors appoint executives to manage day-to-day activities.
- Taxation: Like other corporations, public limited companies are subject to corporate taxation. However, the tax rates and requirements may vary depending on the country in which the company is based.
Types of Public Limited Companies
There are different types of public limited companies based on their organizational structure, objectives, and the way they operate. The two primary types are:
Listed Public Limited Company
A listed public limited company is one whose shares are listed on a recognized stock exchange. These companies allow the public to buy and sell shares easily on platforms like the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). Examples of listed public limited companies include global brands like Apple, Amazon, and Google.
- Advantages: Easier access to capital through public stock offerings. Liquidity for shareholders. Increased visibility and credibility.
- Disadvantages: High regulatory compliance. Vulnerable to market fluctuations. Pressure to meet quarterly financial targets.
Unlisted Public Limited Company
An unlisted public limited company is a company whose shares are not listed on a stock exchange but are still available for purchase by the public. These companies may seek to go public in the future or remain private for various reasons.
- Advantages: Less regulatory pressure than listed companies. More control over business decisions without shareholder interference.
- Disadvantages: Limited access to capital markets. Less liquidity for shareholders. Potential challenges in raising funds for expansion.
Public Limited Company FAQs
What are some examples of public limited companies?
Public limited company examples include multinational corporations such as Apple, Microsoft, and Google. These companies have shares that are traded publicly and offer investment opportunities to individuals and institutions alike.
What is the difference between a public limited company and a private limited company?
The main difference is that a public limited company can offer its shares to the general public through a stock exchange, while a private limited company restricts the transfer of its shares and does not trade them publicly.
Can public limited companies issue more shares in the future?
Yes, public limited companies have the ability to issue more shares to raise additional capital. This is one of the key features of public limited companies, enabling them to expand or fund new projects.
What are the key features of a public company?
The features of public company include ownership through shares, limited liability for shareholders, the ability to raise capital from the public, and regulatory oversight. These features help public companies operate on a larger scale and provide transparency to shareholders.
Do public limited companies pay dividends?
Yes, public limited companies often distribute a portion of their profits as dividends to shareholders. The decision to pay dividends is made by the board of directors based on the company’s financial performance.
