A public limited company (PLC) is a corporation whose shares are publicly traded on a stock exchange. Shareholders have limited liability, responsible only up to their investment. A PLC can raise substantial capital through public offerings but faces greater scrutiny and governance standards.
Key features
- Limited liability
- Shares traded on a stock exchange
- Minimum share capital requirement
- Separate legal entity
- Subject to stringent regulatory requirements
| Advantages | Disadvantages |
|---|---|
| Access to capital through the sale of shares. | Complex and costly setup process. |
| Limited liability for shareholders. | Extensive regulatory compliance requirements. |
| Enhanced credibility and public image. | Greater scrutiny and loss of privacy. |
| Ability to attract high-quality employees with stock options. | Risk of hostile takeovers. |
| Perpetual succession regardless of changes in ownership. | Pressure to meet short-term financial goals. |
| Easier to raise large amounts of capital. | Dilution of control among many shareholders. |
| Increased transparency and accountability. | Higher administrative and reporting costs. |
| Greater potential for expansion and growth. | Mandatory disclosure of financial information. |
| Ability to spread risk among a larger number of shareholders. | Risk of losing control to external shareholders. |
| Easier to merge with or acquire other companies. | Potential for conflicts of interest among shareholders. |
Multiple Choice Questions
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Question 1: What is a public limited company (PLC)?
A) A business owned by a single individual
B) A corporation whose shares are publicly traded on a stock exchange
C) A partnership with limited partners
D) A government-owned entity
Explanation: A corporation whose shares are publicly traded on a stock exchange.
Question 2: What type of liability do shareholders in a PLC have?
A) Unlimited liability
B) Joint liability
C) Limited liability
D) No liability
Explanation: Limited liability.
Question 3: How can a PLC raise substantial capital?
A) By borrowing from banks
B) Through public offerings on the stock exchange
C) By reinvesting profits
D) Through government grants
Explanation: Through public offerings on the stock exchange.
Question 4: Which of the following is a requirement for a public limited company?
A) Minimum share capital
B) Only one director
C) No need for regulatory compliance
D) Shares not traded publicly
Explanation: Minimum share capital.
Question 5: What distinguishes a PLC from a private limited company (Ltd)?
A) Limited liability
B) Shares traded on a stock exchange
C) Separate legal entity
D) Small number of shareholders
Explanation: Shares traded on a stock exchange.
Report Card
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Related Links
- What is a business
- Types of business entities
- Sole trader
- Partnership
- Public limited company
- SWOT analysis
- Mission statement
- Vision statement
- Aims, Objectives, and Strategies
- Ethical objectives
- STEEPLE analysis
- Stakeholders
- Business Growth
- External business growth
- Economies of Scale
- Mergers and takeovers
- Joint venture
- Franchise
- Multinational Companies (MNCs)
- Worksheets
- YouTube videos
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