Public limited companies must include the words “public limited company” or its abbreviation plc and may invite members of the public to subscribe for shares or bonds. Certain plcs, such as national concerns are exempt from using the plc abbreviation. Similar to a private limited company, it affords its members limited liability.
The formation of a plc requires: (i) a trading certificate setting out the entitlement to do business and to borrow capital; (ii) a minimum share capital of £50,000 of which at least 25% must be fully paid up, together with the whole of any share premium. Capital may be in non-cash forms. However, any non-cash contributions have to be independently valued; (iii) 2 directors, one of whom can be the company secretary; and (iii) two shareholders. It can also choose to be quoted on the stock exchange or to be unlisted, however many plcs choose to be listed on the London Stock Exchange or the Alternative Investments Market.
The formation of a plc requires a minimum of 2 directors. The director may be the chairman. In general, anyone can be a director of a plc provided that they have not been disqualified based on the following grounds: (i) is over 70 years old or reaches the age of 70 while in office, unless appointed or reappointed by the resolution of the company in a general meeting where special notice has been given; (ii) is an discharged bankrupt, or disqualified by a Court from holding a directorship, unless given leave to act in respect of a particular company; or (iii) is under the age of 16. No nationality or residency requirements apply.
Directors are responsible for the day-to-day management of the company and subject to various statutory duties that, if breached, can result in personal liability. The duties, which are set out in the Companies Act 2006, include the requirements to:
- act in accordance with the company’s constitution and only exercise their powers for the purpose for which they were conferred; and
- act in a manner considered to be in good faith, to be the most likely to promote the success of the company for the benefit of its members as a whole.
When exercising this duty, directors should have regard to a number of issues, including:
- the likely consequences of any decision in the long term;
- the interests of the company’s employees;
- the impact of the company’s business on the community and the environment;
- the need to foster the company’s business relationships with suppliers, customers and others;
- the desirability of the company maintaining a reputation for high standards of business conduct; and
- the need to act fairly between members.
In discharging duties, a director should also exercise reasonable skill, care and diligence and independent judgement. Directors also have a duty to avoid situations where they have, or may have a direct or indirect interest that conflicts with the interests of the company and to disclose the existence of any interest in any proposed or existing contract with the company. Directors also have a duty not to accept benefits from third parties if they could give rise to a conflict of interest.
In cases of actual or prospective insolvency, the duties of a director are still owed to the company but must act in the best interests of the creditors, rather than its shareholders. Personal liability is also imposed in certain situations for permitting an insolvent company or prospectively insolvent
company to continue trading unless it is demonstrated that it is beneficial for the creditors to continue to do so.
Additionally, public companies must have a company secretary who may also be a director. Although the company secretary does not need formal qualifications, the directors of a plc should make sure that the secretary has the knowledge and the experience to carry out the functions. The company secretary however, should meet one or more of the following qualifications:
- be a member of any of the following bodies:
- the Institute of Chartered Accountants in England and Wales;
- the Institute of Chartered Accountants of Scotland;
- Association of Chartered Certified Accountants;
- the Institute of Chartered Accountants in Ireland; the Institute of Chartered Secretaries and Administrators; the Chartered Institute of Management Accountants; or
- the Chartered Institute of Public Finance and Accountancy.
- have held the office of company secretary of a public company for at least 3 out of the 5 years immediately before their appointment as secretary;
- be a barrister, advocate or solicitor called or admitted in any part of the UK; or
- be a person who appears to the directors to be capable of carrying out the functions of company secretary, because that person holds, or has held, a similar position in another body or is or was a member of another body.
While the legislation does not specify the role of the company secretary, company secretaries are generally expected to undertake the following duties: (i) maintain the statutory register; (ii) ensure that the company files statutory information promptly; (iii) provide members and directors with notice of meetings; (iv) provide members with proposed written resolutions and auditors with any passed resolutions; (v) send copies of resolutions and agreements to the Companies House; (vi) supply a copy of the accounts reports to every member of the company, every debenture holder and every person who is entitled to receive notice of general meetings; (vii) keep, or arrange for copies of all members’ resolutions to be kept (passed other than at general meetings), and minutes of all proceedings and general meetings; (viii) ensure that people entitled to do so can inspect company records; (ix) keep custody and the use of the company seal.
As the secretary is an officer of the company, they may be criminally liable for defaults committed by the company. For example failure to file, in the time allowed, any change in the details of the company's directors and secretary, and the company's annual return.
A company has the option to increase or decrease its authorised share capital by passing an ordinary resolution, unless its articles require a special resolution. A copy of the resolution and Form 123 (for the increase) and Form 122 (for the cancellation of shares) must reach the Companies House within 15 days and 1 month respectively.
A company may have as many different types of shares as it wishes, all with different conditions attached to them. Generally share types are divided into the following categories:
- Bearer shares are a legal instrument denoting company ownership, and are usually in the form of share warrants. A share warrant is a document which states that the bearer of the warrant is entitled to the shares stated in it. If authorised by its articles, a company may convert any fully paid shares to "share warrants". These warrants are easily transferable without any need for a transfer document; that is, they can simply be passed from hand to hand. When share warrants are issued, the company must strike out the name of the shareholder from its register of members and state the date of issue of the warrant and the number of shares to which it relates. Subject to the articles, a share warrant can be surrendered for cancellation. If so, the holder is entitled to be re-entered into the register of members. Vouchers are usually issued with the share warrants in order that any dividends may be claimed;
- Ordinary shares of the company do not accord any special rights or restrictions and may be divided into classes of different value;
- Preference shares normally carry a right that any annual dividends available for distribution will be paid preferentially on these shares before other classes;
- Cumulative preference shares carry a right that, if the dividend cannot be paid in one year, it will be carried forward to successive years; and
- Redeemable shares are issued with an agreement that the company will buy them back at the option of the company or the shareholder after a certain period, or on a fixed date. A company cannot have redeemable shares only.
Every company must deliver an annual return to Companies House at least once every twelve months. It has 28 days from the date to which the return is made up to do this. Financial statements are filed within 6 months from accounting reference date of a public lmited company. In relation to the filing of the first set of accounts which cover a period of more than 12 months, it should be filed within 18 months from the date of incorporation of the private limited company, or 3 months from the accounting reference date, whichever is longer. Failure to file a return is a criminal offence, for which the officers of the company may be fined.
Both a private company limited and an unlimited company with a share capital may re-register as a plc. The private company must pass a special resolution that it be so re-registered and deliver a copy of the resolution together with an application form to the Registrar. The resolution must: (i) alter the company's memorandum so that it states that the company is to be a public limited company; (ii) increase its share capital to the statutory minimum of £50,000; (iii) make any other alterations to the memorandum so that it conforms to that required for a public limited company; (iv) make any required alterations to the articles of association of the company. Additionally, if it does not already have sufficient share capital, the company must issue £50,000 in shares a minimum of the 25% part paid.
A public limited company may re-register as a private limited company or private unlimited company at any time with few formalities.
A court may also order a public company to re-register as private on approving a “minute of reduction” of share capital which results in the issued share capital falling below the statutory minimum. In such a case the court will also specify alterations to the company's memorandum and articles. A special resolution to re-register is not required.