Public Limited Company
A public limited company is a company that has permission to offer its registered securities for sale to the general public, typically through a stock exchange, or occasionally a company whose stock is traded over the counter (OTC) via market makers who use non-exchange quotation services.
A public company is defined as a company which is not a private company. The following conditions apply only to a public company:
- It must have at least seven shareholders.
- A public company is not authorized to begin business upon the grant of the certificate of incorporation. In order to be eligible to start business as a corporation, it should obtain another document called "trading certificate".
- It should publish a prospectus or file a statement in lieu of a prospectus before it can start transacting business.
- A public company is needed to have at least three directors.
- It should hold statutory meetings and obtain government approval for the appointment of the management.
Advantages of a Public Limited Company
- The shareholders have limited liability.
- A company can raise additional capital by issuing more shares or debentures.
- Greater borrowing power.
- A board of directors with experience/ expertise can be appointed.
- Shareholders can sell/transfer their shares freely.
Disadvantages of a Public Limited Company
- There is a loss of overall ownership.
- There is a loss of control of the business.
- Decisions take longer and there may be disagreement.
- The personal touch may be lost.
- When setting up a company, significant expenses are incurred.
- There are more statutory regulations to conform.
- Profits are shared amongst a far greater number of people.
- Public disclosure of the financial affairs is necessary.
- Published accounts have to be prepared.