What Is a Public Limited Company (PLC)?
The acronym PLC (public limited company) at the end of a company name signifies that the business offers shares to the public. It is used in Great Britain and some Commonwealth nations and is the equivalent of the U.S. "Inc."
- PLC, or public limited company, is the British equivalent of the U.S. corporation, or Inc.
- All of the companies listed on the London Stock Exchange are PLCs.
- The formal names of some familiar British brands like Burberry and Shell include the suffix PLC.
The use of the PLC abbreviation after the name of a company is mandatory and communicates to investors and to anyone dealing with the company that it is a publicly-traded corporation.
How a Public Limited Company (PLC) Works
In legal terms, a PLC designates a limited liability company (LLC) that has offered shares of stock to the general public. The buyers of those shares have limited liability. They cannot be held responsible for any business losses in excess of the amount they paid for the shares.
In the United Kingdom, a PLC operates along similar lines as a public corporation in the U.S. Their operations are strictly regulated and are required to publish periodic reports to shareholders and prospective shareholders on their true financial health.
Advantages and Disadvantages of a PLC
The biggest advantage of forming a public limited company (PLC) is that it grants the ability to raise capital by issuing public shares. A listing on a public stock exchange attracts interest from hedge funds, mutual funds, and professional traders as well as individual investors. That generally leads to far more capital for investment in the company than a private limited company can amass.
A PLC thus has greater potential to grow and expand, start new projects, buy more rivals, pay off debt, and fund research and development.
The largest PLCs make up the Financial Times Stock Exchange 100 Index, known as the Footsie.
On the other hand, there's much more regulation for a PLC in Great Britain, as there is for a pubic corporation in the U.S. They are required to hold annual general meetings open to all shareholders and are held to higher standards of transparency in accounting.
Because they鈥檙e public, they鈥檙e also vulnerable to pressure from shareholders, takeover bids from rivals, and scrutiny from the media.
Examples of PLCs
All of the companies listed on the London Stock Exchange (LSE) are, by definition, PLCs. The fashion retailer Burberry is Burberry Group PLC. Automaker Rolls-Royce is Rolls-Royce Holdings PLC.
The 100 largest PLCs on the London Stock Exchange are grouped together in an index called the Financial Times Stock Exchange 100 (FTSE 100) or, colloquially, the Footsie.
The companies in this group are representative of the United Kingdom's economy as a whole. The Footsie is comparable to the Dow Jones Industrial Average (DJIA) in the United States.
The biggest PLCs by market capitalization in the Footsie, as of early 2020, included Royal Dutch Shell, HSBC Holdings, BP, GlaxoSmithKline, and British American Tobacco. The formal names of all of these companies include the PLC designation.
Not all PLCs are listed on a stock exchange. A company may choose not to list on an exchange or may not meet the requirements for listing.