7.4 - Public Limited Companies

The public limited company has limited liability. In order to set up this type of company, the business requires a minium of £50,000, two people need to sign the memorandum of association and there needs to be a minimum of 7 shareholders.

The shares of public limited companies are traded on the stock exchange. The business will have an annual general meeting which can be attended by the shareholders. In these meetings, the directors present the accounts and annual reports of the company to the shareholders. At these meetings, shareholders can vote on certain issues and elect new directors for the company.

Small to medium sized public limited companies can be listed on the Alternative Investment Market (AIM). It attracts investors to such companies which are not as established as the major companies listed on the main stock exchange.

Hence the AIM market lists smaller companies with £50,000 investment capital and more. On the London stock exchange, the companies listed are multi million and multi billion pound companies. Hence the criteria is higher and smaller to medium companies are encouraged to list on the AIM.

Shareholders are not involved in the daily running of the business. Therefore, the exclusive and non-exclusive directors of the company are the decision makers. Non-exclusive directors (NEDs) are specifically employed for their expertise and tend to work on a part-time basis.


Liability and Legal Issues of a Public Limited Company

The amount of liability of an individual shareholder of the company is limited and only money invested in shares of the company can be lost if the company is in financial difficulty.

It will not affect the private assets of the shareholders as only the business assets are liable. Neither managers nor shareholders are liable personally for the business.

The legal issues are similar to those of a private limited company. The name of the company must be included in all it's stationary and clearly displayed outside it's offices and places where it operates in business.

Furthermore, it must display it's registration details on all stationary including registration number, place of registration and registered office.

The company must contact HM Revenue and Customs for tax and VAT purposes.

Lately, the Registrar of Companies must receive the duly completed and signed documents which are needed for registration.

Every legal structure has their benefits and setbacks. It's important that any business must understand the legal implication which they choose.