Business Unit 2

When a PLC (Private Limited Company) has met minimum requirements (e.g. the number of shareholders and it's record of profitability) it can choose to convert itself to a public limited company (plc)

Public Limited Companies Can Share Shares To Anybody

• Private Limited companies can only sell new shares if all of the current shareholders agree
• A public limited company is formed when a private limited company is 'floated' on the stock market allowing any member of the public to buy shares in the business

Advantages

• Still have the main advantage of all limited companies - having limited liability
• Can raise much more capital as a plc by selling shares through the stock exhange (floating on the stock exhange) since there are more potential buyers
• Increased capital allows the company to grow and diversity
• The status of the company is increased by becoming a plc, so banks are more willing to lend money to them

Disadvantages

• The shareholders own the company, but a different group of people called the directors control the day to day running of the business. This is called the "divorce ownership and control"- the directors make the decisions that dont directly benefit the shareholders. This can cause disagreements
• There is always that someone could buy enough shares to take over the business - if they can convince the shareholders to sell
• Shareholders want to make as much profit as possible, which can make it difficult to persue other aspects of the business