Some businesses prefer trading as limited companies and others prefer to set up a public limited company for businesses. The type of incorporated entity used for your businesses must achieve your company ultimate goals. The differences of private limited companies and public limited companies are summarised below.
A public company is a company limited by shares with its memorandum states that the company is to be a public company and to which the provisions of the Companies Act as to the registration or re-registration of a company as a public company have been complied with. Any company which is not a public company is classified a private limited company.
Company Name
The name of a public company must end with the words Public Limited Company or PLC and, for Welsh companies, Cwmni Cyfyngedig Cyhoeddus or CCC. The company will be a Welsh company if its registered office is to be in Wales.
The company's memorandum of Association
The memorandum which the company registers with the Companies' Registry must be in the form specified for a public company by the Companies Act 1985 (Table A to F) or to be as close to that form as is possible in the circumstances. If the company is to be a public company limited by shares, the form with which it has to comply is contained in Table F of the Act. The main difference between the forms of memorandum specified for public companies and for private companies is that the form for a public company requires its memorandum to include an additional clause stating that the company is to be a public company.
The nominal value of the share capital
The nominal value of the public company's allotted share capital must not be less than the 'authorised minimum' which is currently £50,000. When a public company allots shares, it is under an obligation to ensure that at least 25% of the nominal value of the shares (plus the whole amount of any premium on the shares) is paid on allotment. For a private company, it can issue shares without requiring any immediate payment for them. In other words, the share capital can be unpaid.
Number of members and officers
Public companies, unlike private companies, must have at least two members (in the past they needed seven members. They must also have at least two directors, whereas private companies need have only one. The company secretary of a public company must be the person with relevant knowledge and qualifications as required by law.
The issue of shares or debentures
The principal advantage which a public company had over a private company used to be that public companies could offer shares or debentures to the public for cash or other consideration and to allot those shares or debentures with a view to them being offered for sale to the public (S.81 Companies Act 1985). Offers of shares to the public are governed by Part VI of the Financial Services and Markets Act 2000 and the Public Offers of Securities Regulations 1995 (SI 1995 No. 1537). These require the issue of a prospectus in any case where shares are to be 'offered to the public' within the terms of the legislation.
Registration requirements
The procedure to follow and documents required to register a public company are the same as for a private company. Once the Registrar of Companies is satisfied that the documents comply with the registration requirements, a certificate of incorporation will be issued.
However, before the public company can do business or borrow money, the company must obtain from the Registrar a further certificate which will only be issued if the Registrar is satisfied that the company's share capital is adequate.
The procedure which the company must go through to get this additional certificate involves a director or the company secretary filing a statutory declaration (on Form 117) with the Registrar. The declaration will state that the nominal value of the company's allotted share capital is at least equal to the authorised minimum of £50,000. The company must also supply on Form 117 details of:
(a)The amount paid up on the allotted share capital which must exceed the minimum of £50,000.
(b)The amount of the preliminary expenses and details of who will meet them; and
(c)Any amount or benefit paid to the company's promoters,
A company which does not obtain this additional certificate before it commences business can face some severe consequences, If the company fails to meet its obligations in connection with a transaction entered in to at a time when it does not have the additional certificate, the directors will be jointly and severally liable to indemnify the other parties to the transaction for any loss, Furthermore, both the company and its offices will be liable to a fine and if the company fails to obtain this certificate within one year of its registration, the court can wind the company up (S-122 Insolvency Act 1986.
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