There are many business structures in the UK, and a public limited company is the most prominent among larger entities seeking public investment. This business structure involves the public offering of its shares. This guide lists the advantages and disadvantages of a public limited company in light of current UK regulations and established UK PLCs, to help you decide whether this structure is suitable for formation or shareholding.
A Quick Glance at a Public Limited Company
A public limited company is a type of limited company owned by shareholders and managed by directors in its day-to-day operations. Public limited companies can freely sell and trade their shares to multiple public investors and provide them with limited liability protection. PLCs that want to trade their shares publicly list themselves on a stock exchange, such as the London Stock Exchange and are subject to its rules and regulations. A few examples of known public limited companies in the UK include HSBC Holdings, Tesco Plc, Barclays Plc, GlaxoSmithKline (GSK), and AstraZeneca Plc.
Why Is It Important to Consider Public Limited Company Advantages and Disadvantages?
In order to grow and expand your business, selecting a suitable business structure from the beginning lays a strong and scalable foundation for that business. On the contrary, selecting the wrong structure can result in additional costs, increased scrutiny, and errors along the way.
You should analyse the advantages and disadvantages of a public limited company, given that you have opted for this structure to ensure your investment will be put into a fruitful venture.
Assessing the Advantages and Disadvantages of a Public Limited Company
You can weigh the following public limited company advantages and disadvantages to determine whether its pros make this structure worth investing in or its cons overshadow the advantages:
Advantages of a Public Limited Company
Analyse the public limited company advantages to learn why you should opt for this structure:
Raising Capital through Public Issue of Shares
Without the investment of capital, growing or expanding your business will be gruelling. Rolls-Royce has time and again raised billions of pounds by issuing new shares on the London Stock Exchange. More specifically, in 2020, Rolls-Royce raised £2 billion from a rights issue and secured additional financing from institutional investors.
Easy access to capital is the main advantage of a public limited company. A PLC is the only type of company that can raise funds by listing them on a stock exchange to sell to the public. It can also get a loan from a bank or other financial institution by pledging its assets as collateral. Furthermore, it offers investors the opportunity to own shares in the business.
If your startup is facing a shortage of resources and funds, you can employ cost-cutting practices to ease things for you. Find out the sources you can raise funds for your business:
Wider Shareholder Base and Reduced Risk
When a PLC offers shares to several individuals, it minimises the risk of liabilities since ownership is now spread among many people. Your business, thus, is not required to depend on a limited number of investors. Tesco PLC is a case in point here. One of the UK’s largest and most established public limited companies, Tesco has a multitude of shareholders. Its vast base includes both large institutional investors and retail investors (the general public).
Did you know there are two types of shareholders who can have ownership in your public limited company?
Limited Liability Protection
As the PLC shareholders have limited liability protection, it can significantly help you attract more investors to fund your business expansion.
Access to More Avenues for Finances
Another notable benefit among the advantages of a public limited company is its ability to secure additional financial options than private companies. It is because public companies are subject to greater levels of scrutiny from regulators and the public. Subsequently, choosing the PLC structure builds greater credibility for your business in the public eye.
To corroborate the point, Raspberry Pi (the British computing startup ) went public on the London Stock Exchange in June 2024 and raised a total of £178.9 million in its initial public offering (IPO) on the London Stock Exchange. Notably, after being listed on the London Stock Exchange, Raspberry Pi gained access to a broader investor base, including institutional investors.
Easy Transferability of Shares
It is relevant to mention that both private and public limited companies have shares that are owned by the shareholders. However, private companies are subject to certain restrictions when it comes to the selling or transferring of shares. On the other hand, a public limited company allows easy transferability of shares by allowing public shareholders to purchase or sell shares in the company without having to ask for permission from the company directors.
This easy transferability of shares enhances the willingness of your potential investors to buy shares in your company. Additionally, when a PLC has earned profits in excess, they are distributed to shareholders in the form of dividends. A public limited company structure facilitates you even in stepping away from the business. Since a PLC provides liquidity for shareholders, they can sell their shares on an open market. This process is quick, transparent, and does not disrupt the company’s daily operations.
Still struggling to find the most suitable structure for your startup, private, public, or other? This guide will help clarify your options.
Disadvantages of a public limited company
After learning the advantages of a public limited company, you should also consider its constraints to make an objective decision:
More Regulatory Requirements
A public limited company is subject to more regulations than private companies. These include disclosure of financial information and reporting requirements (IR35 Rules and Confirmation Statement) with Companies House. The public limited company must also hold an Annual General Meeting (AGM) each year, where shareholders vote on important matters, such as whether or not to declare dividends.
You can get an insight into the reporting requirements of a PLC with the help of the following guides:
Increased Filing/Reporting Requirements in the Wake of ECCTA
With the enactment of the Economic Crime and Corporate Transparency Act (ECCTA 2023), Companies House now has wider authority to improve transparency over UK companies and other legal entities to strengthen the business environment in the UK. As a result, a PLC’s directors and shareholders will have increased responsibilities, including:
- They must ensure their relevant information on filings is correct because the Act gives Companies House more power to query, reject, or remove filings that it considers incomplete, misleading, or suspicious.
- Their information on the company register is accurate because the registrar wields greater powers to question and challenge inaccurate or inconsistent information.
- Mandatory identity verification will apply to all directors and PSCs (persons with significant control).
- There must be an ‘appropriate address’ for companies, such as their registered office and email. Thus, the companies can no longer use a PO box as their registered office address.
- When incorporating a PLC, the founders must provide a “lawful purpose” statement to verify that the company is being formed for a lawful purpose.
- A company will also need to confirm that its intended future activities are lawful on its annual confirmation statement.
- A company must now file its accounts using software. However, for small and micro companies, the option to file abridged accounts has been abolished.
Higher Set-up Costs
A public limited company must make an initial public offering (IPO) of shares. This is when the company sells its first batch of stock, which allows it to raise money for growth and expansion purposes.
Importantly, to set up a public limited liability company, you must have a minimum of £50,000 share capital. Apart from that, it is necessary that you pay 25% (£12,500) of this amount before your company can start trading. Further down the line, you will also incur fees if you take professional assistance in order to list your company on the Stock Exchange. Now, these costs might be expensive for certain businesses, and they opt to stay private.
Ownership and Control Issues
When considering the disadvantages of a public limited company, you must not overlook how it can dilute the founding members’ influence. In a public limited company, founders and original owners are more prone to losing significant control. To substantiate the argument, according to OECD data, institutional investors hold over 60% of the shares in many publicly traded companies in the UK. More importantly, large shareholders in a PLC often command around a third of a company’s equity. Now, with a high concentration of ownership, the institutional shareholders exert significant influence, and therefore, the company’s crucial decisions cannot be made without their approval.
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More Vulnerable to Takeovers
While easy access to shares is an upside for a PLC, it is also a pitfall among other public limited company disadvantages. As your PLC shares are publicly traded, it is more vulnerable to takeovers from external parties, like private equity investors or your rival companies. They can accumulate a significant number of shares in advance before launching a bid attempt to take over your company’s management. It is also known as a hostile takeover.
Hargreaves Lansdown (Britain’s largest investment platform) agreed to a £5.4 billion takeover by a consortium led by CVC Capital Partners in August 2024. Similarly, the Czech billionaire Daniel Křetínský’s EP Group acquired the parent company of Royal Mail, International Distribution Services (IDS), in a £3.6 billion takeover bid. Shareholders approved the takeover on April 30, 2025.
The above-mentioned cases corroborate that a public limited company is more vulnerable to takeovers with its publicly tradable shares.
Short-Term Performance
Public companies tend to focus more on short-term profits than private companies do because they face more external pressure. Most PLCs are required to report their performance to shareholders at regular intervals, primarily through half-year and annual results. Trading updates are also needed. This ongoing scrutiny can thus prompt a short-term focus on performance and market expectations.
Bottom Line
Before selecting a PLC as your final choice in business structures, do not forget to scrutinise the advantages and disadvantages of a public limited company. Doing so will leave you with no ambiguity about whether it is the most favourable business entity. Alternatively, with the help of market-leading startup accountants, your startup journey can become smooth sailing. We understand the urgency, cost limitations, and growth objectives that your new business may face, so we have built growth-based solutions and a network that will help you set your business in motion.
FAQs
Is it easier to transfer shares with a public limited company than a private one?
Yes, one of the advantages of a public limited company is the easy transferability of shares. In a PLC, public shareholders can purchase or sell shares in the company without requiring permission from the company directors, unlike a private company, where the selling or transferring of shares is subject to certain restrictions.
Does a public limited company have any setup costs?
Yes, to set up a public limited liability company, you must have a minimum of £50,000 share capital. It is also necessary that 25% (£12,500) of this amount is paid up before your company can start trading. Further, if you take professional assistance from an accountant, you will also consider the fees incurred for this.
Is it easy to exit a public limited company?
Yes, a PLC offers ample flexibility for exiting the business. If things do not run smoothly or as expected in the future, a public limited company structure facilitates you even in leaving the business. This way, it is easier for them to withdraw investment compared to a private company. Shareholders can easily sell their shares on the public market. Moreover, you can exit this business structure by transferring the ownership of a business to someone else through share sales.
Additional Resources
