Public limited companies
HELLO, EVERYONE. This week, we will consider the public limited companies. Remember that for each type of business, the definition, characteristics, legal aspects, advantages and disadvantages are what should be considered.
Public limited companies are also known as joint stock companies. A public limited company has a minimum of seven shareholders, but no maximum. It may start out as a public company or be formed from a private company that has ‘gone public’.
CHARACTERISTICS OF PUBLIC COMPANIES
1. The company’s name will have PLC at the end of it.
2. In addition to the documents that must be provided to the Companies Office of Jamaica by the private company, the public company also needs a Certificate of Trading. This is issued by the Companies Office of Jamaica when they are satisfied the business has raised the minimum amount of capital that will result in the fulfilment of their plans and objectives.
3. The capital raised is largely through selling shares, selling debentures (loan capital) and borrowing from financial institutions.
4. Large amounts of capital can be raised.
5. Shareholders do not have much to do with the day-to-day operations of the business.
6. At the annual general meeting, shareholders elect a board of directors who are responsible for the decisions of the company. There is one vote per ordinary share.
7. A share is part of the capital of a company or co-operative. Shares are sold to the general public through the stock exchange. There are two main types of shares sold: ordinary shares and preference shares. You will find it useful to consider the similarities and differences between these two types of shares.
8. The registrar will approve the issue of a certain number of shares of a certain par or nominal value.
9. Each public company must have a secretary and must publish their accounts.
10. Like the private company, the public company has a separate identity to its owners.
11. Profits are distributed among shareholders in the form of dividends.
LEGAL ASPECTS
These are the same as for the private limited company, with the addition that they are legally allowed to register and use the stock exchange.
ADVANTAGES
1. They are able to raise large sums of capital.
2. The liability of the shareholders is limited.
3. It is fairly easy for them to borrow money from financial institutions as they are seen as secure borrowers.
4. Since they are large-scale businesses, they may reap economies of scale.
5. The public limited company is independent of its owners.
6. Many owners share the risk of the business.
DISADVANTAGES
1. The personal touch which is evident in smaller businesses is often lost.
2. These businesses are more difficult to manage than smaller-type businesses.
3. Conflict of interest may arise between managers and shareholders.
4. Too much expansion leads to diseconomies of scale (disadvantages of largescale production).
5. Accounts must be published and sent annually to the trade department for inspection.
Your task for this week is to discuss three similarities and three differences between a private limited company and a public limited company. Additionally, make a list of THREE examples of private limited companies and THREE examples of public limited companies. Next week, we will be looking at the franchise as the final type of private-sector business.
Bye for now.
Yvonne Harvey is an independent contributor. Send feedback to kerry-ann.hepburn@gleanerjm.com.