PUBLIC LIMITED COMPANIES

(A) ABOUT PUBLIC LIMITED COMPANIES (PLCs) Unlike a private limited company which can be formed with a sole director, a plc must be formed with at least two directors, at least one of which must be a natural person rather than a corporation. It must also have a company secretary. A major difference between a private limited company (Ltd) and a public limited company (plc) is that the public can buy and sell shares (sometimes known as the company’s ‘stock’) in a plc, often during an initial public offering (IPO), which is when a company sells its shares for the first time. This is also known as ‘floating’ the company. In order for this to happen, the shares must be listed on a regulated market, for example, the London Stock Exchange, the New York Stock Exchange or the NASDAQ, which was the first electronic exchange that allowed investors to buy and sell shares on a fast, computerized system, without the need for a physical trading floor. Investment banks, like Goldman Sachs or Morgan Stanley, often sell the shares offered in an IPO directly to qualified buyers. This can be an expensive investment option for buyers because companies initially sell shares in bulk quantities. Once offered for resale, the price of shares purchased in an IPO typically goes up. However, buyers cannot sell them for a certain period of time, and by that time the share price might have fallen below the price paid in the initial offering.

(B) LISTING ON THE STOCK EXCHANGE There are two types of stock exchange listing in the UK. A premium listing requires a company to meet regulatory requirements which are higher than the minimum set down in the relevant law. If a company chooses a premium listing, then a listing sponsor is required. He or she will have a regulatory role and will lead a team of professional advisors through the listing process. A standard listing requires that the company meets the minimum legal requirements for listing and a sponsor is not needed. However, there is no legal requirement to list a plc, and many public companies do not do so, effectively operating as unlisted, private companies. Although this means that the company will be subject to further statutory regulation, the advantage is that the business can benefit from the prestige it receives from being a plc, can often agree better terms with its suppliers, and may be seen as more trustworthy by potential creditors. An unlisted plc must sell it shares through a stockbroker, an appropriately licensed person, who, in the UK, has passed exams administered by the Financial Services Authority.

(C) MINIMUM SHARE CAPITAL AND SHARE CAPITAL MAINTENANCE Before it can start trading its shares, a UK plc must allot shares with an (1) ….. nominal value of at least £50,000, with each share being at least one quarter (2) ….., which means that the company must have received at least £12,500. The original subscribers are required to pay for their shares in (3) ….. and the company must obtain a trading certificate from Companies House confirming it has allotted the minimum required capital. Once the company is trading, any allotment of shares for non-cash (4) ….. will require independent valuation before allotment takes place. Pre-emption rights can only be excluded for a specified period rather than indefinitely, and when distributing dividends, a plc must ensure its net (5) ….. do not fall below the level of called up share capital. Called up share capital refers to capital which is paid up and any share capital which is to be paid on a specified future date. A company can increase its authorised share capital by passing an ordinary resolution, unless its Articles of Association require a (6) ….. resolution. A copy of the resolution must reach Companies House within 15 days of being passed.

(D) FINANCIAL ACCOUNTS AND ANNUAL GENERAL MEETINGS The accounts of a UK plc are subject to a high level of transparency and must be (7) ….. and filed within six months of its financial year end. Public limited companies must hold an Annual General Meeting (AGM), where its accounts must be presented to the members for approval and the appointment of a company auditor must be confirmed. A plc cannot apply to be voluntarily (8) ….. the company register at Companies House in the way that a private limited company can, and must first be re-registered as a private limited company in order to do this.