Public Limited Company FormationA 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, it must register with Companies House. 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.
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.
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.
NB. We do not currently form PLCs.