10 Core Pros and Cons of Public Limited Companies

A public limited company is a form of business that is made up of a minimum of seven members and has no maximum number of members. The company also requires a minimum of three directors. Some of the companies are listed on the stock exchange.

The stock of the company is normally traded publicly. Examples of public limited companies include the London Stock Exchange.

Pros and Cons of Public Limited Companies

Pros of Public Limited Companies

  1. Easy to raise capital

The company is able to sell its shares to the public and anyone who is able to invest. That makes it easier for the company to raise capital.

  1. Attract investors

As the company can be listed on the stock exchange market, many people are in a position to see how the company is rated, and through that it is easier to get more investors.

  1. Shares can be transferred

The shares can easily be transferred making the shareholders to benefit from the company as they can compare with other companies and decides to sell some of their shares when the prices are a little bit high.

  1. Easy to obtain loans

Banks and other financial institutions find it convenient to offer loans to public limited companies especially the ones that are listed on the stock exchange market. The company can also have the upper hand of negotiating the favorable interest rates and repayment terms of loans as their accounts are always made available for the companies’ house.

  1. Shareholders are able to benefit

As the stock is traded publicly, this makes it easy for the shareholders to compare prices with other companies and are able to benefit because they can sell their shares to other companies when the prices are high hence gaining profit on their shares.

  1. Greater expansion opportunities

Being able to access finances from banks and other financial institutions, makes it easier for the company to go for new projects which makes it able to expand its company.

Read More: Pros and Cons of Private Limited Companies

Cons of public limited companies

  1. Transparency

The accounts of the company are always edited and made available to the companies’ house. The company has to disclose more detailed information about the performance of the company which can give a company bad reports making it lose some of its investors.

  1. Difficulty in controlling shareholders

It is difficult for the directors to control shareholders and to be accountable to them. This is because the shareholders are allowed to trade publicly.

  1. Higher initial financial commitment

The formation of companies requires high finances. This is because professionals will be needed to run various departments of the company as opposed to private limited companies.

  1. More requirements needed to start

Legal requirements such as trading certificate, a minimum of three directors, the company’s secretary who is qualified, if the company is also listed on London Stock Exchange, it will still have to follow the rules of the market. The requirements are more as opposed to private limited companies.

Read More: Pros and Cons of Partnership 

Summary

Public limited companies have more advantages to shareholders compared to private limited companies. More people opt for public limited companies.

 

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