Advantages of PLC
A Limited Company is a company where the liability of the members of the company is limited to what they invested or guaranteed in the company. These limited companies are further divided into three kinds i.e. public, private or one-person company.A company’s liability may be limited by shares, in which case the liability of the company’s members is limited to the amount of the shares held by them.Public Limited Company is a kind of company whose securities are traded publicly on the stock exchange. In simple words these are the companies that go to the people in to order to raise a capital for a consideration of being able to have an opportunity to be a member of that company and there are no restrictions on the number of stakeholders. It offers shares and debentures to the public and in times of profit the same is shared with the people owning them. The basic feature for a Public Limited Company is that it should be able to provide its shares to the public and in order to do the same it has to contain various things. Every company has to have a minimum share capital of Rs. 5,00,000 containing the words ‘limited company’ in its name. A minimum of 7 members are required to form a public limited company in this country and there should be no self-possession on maximum number of members. Also the shares should be transferrable. These companies can raise funds from general public through open invitations by selling its shares and accepting fixed deposits.Many organisations start their business as a private limited company and later become a PLC in order to raise capital for expansion and development of the company.
There are quite upsides of a Public Limited company. Since it is a limited company as suggested by the name itself the liabilities arising out of the company are only to what extend the shares have been purchased. So when there is a crisis which makes the liability clause comes into question the investors personal possessions are protected since they cannot lose more than what they have invested. Liability for debts is limited to the amount of issued share capital. A limited Company exists as a legal entity in itself, separate from its owners and managers.The business can be sued on its own and not involve its shareholders. The company does not belong to any person since one person can own only a part of it.This clearly signifies the capability of the firm to run independent of its people. This means that even if the shareholders leave the firm or die the firm will still continue to exist in the eyes of law. In the case of a director’s death, an election is held to replace the deceased director. This shows the democratic feature of the company.
Also the management of the company is not only confined to few of its members but to the shareholders as well. They can exercise control over management in general meetings of the company. Also the Minority shareholders are provided protection under the Companies Act against oppression and mismanagement.
These firms have no limit to the numbers of shareholders it can have and it is because of that reason the company can raise large amounts of money. Whenever the company needs capital it has the authority to issue more number of shares in order to expand their business. Also since all the shares are transferrable and accessible to people in all walks of life it is easy to buy and dispose them off when needed and vice versa. By disposing means to sell those shares away when one doesn’t wish to continue to be a member of the company. Also since there shares are easily transferrable they are considered liquid by the investors which makes them flexible i.e. the investors who care all about the money don’t have to stick to the same company. Once they have earned profits and they do not think that being a part of the company would benefit them they can always sell the shares.
Because it is a Public Limited Company the company’s accounts and financial statements are required to be published annually as they are strictly regulated and required by law to do the same. This ensures that they reveal their true financial position to their owners and investors can determine the worth of the shares. This shows transparency in the company and the shareholders feel secure for their investment and also improve their confidence over the company.
From the view point of a Public Limited Company, it is easy to take loans from the bank itself or from a check into cash new orleans agency if the share capital is as big as that of a PLC. The company has the opportunity to make acquisitions more easily as the capital gives it a backing to be a strong firm fit for taking on another firms and due to the same the company gets an admirable profile in the market which consequently affects its shares values and thus benefitting the people investing in them.
Thus we have seen the advantages of the PLC. To sum it up the advantages can be said to be as follows. It has limited Liability which does not lead to loss of personal assets of the members. Since there can be limitless number of shareholders the company can issue innumerable numbers of shares and also increase its capital for the development of the firm. Since the shares are transferrable and the company has to be transparent it gives easy transfer of the shares and also allows the investors to value the shares (not hold on to the same company). The acquisitions of the company give a benefitting profile to the company. At last the shareholders stay in confidence because of the continuity of existence and the unity of direction for it is them that makes the share capital for the company.
Author: This blog is written by Ms. Anmol Srivastava, a passionate blogger & intern at Aapka Consultant.
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