A PLC is a company that has limited liability and has offered its shares to the general public. In the UK, a company must have a minimum share capital of £50,000 by law to qualify as a PLC.
This definition has four critical terms that we will further explore.
“Company”
A company, or a corporation in the U.S., is defined as “an artificial being, invisible and intangible, that exists only in contemplation of the law.” This makes the company a separate legal entity from its owners.
A company can own and rent property, run a business, hire staff, and more. However, it requires a board of directors to run its affairs.
“Public”
A public company is one whose shares are traded freely. This is usually done by listing the company on a stock exchange such as the London Stock Exchange (LSE). However, some PLCs remain unlisted for various reasons.
By selling all or a portion of itself to the public through shares, a public company raises large amounts of funds for expansion or to recover from debt.
A share is a unit of ownership in the company. Owning stocks (shares) makes a holder part-owner of the company. If you owned 1000 shares in a company that issued a total of 10,000 shares, you have 10% equity in that company.
All public limited companies must have the suffix “PLC” in their formal names. In the US, the equivalent of a PLC is the corporation, designated by an “Inc.” suffix.
“Limited liability company”
The United Kingdom Companies Act 2006 c. 46 Part 1 says that a public company is “limited by shares or limited by guarantee.” The concept of limited liability means that shareholders are only responsible for the company’s obligations to limit the value of their shares.
Shareholders and owners of any limited company are protected from being held personally responsible for losses and debts made by the company unless they had issued personal guarantees against loans.
The opposite of limited liability is unlimited liability, in which owners and partners have full legal responsibility for business debts. In most cases, this UK PLC framework is used in its commonwealth.
Examples of public limited companies
Every company on a stock exchange such as the LSE is a public limited company. One example is Rolls-Royce Holding PLC, the maker of Rolls Royce luxury cars.
Rolls Royce is a British multinational company trading under the ticker RR, with a share price of £118.02 at the time of writing.
Another example of a PLC is the French multinational Schneider Electric SE. The SE stands for Societas Europaea, the EU’s equivalent of a public company which means “European Company” in Latin. At writing, Schneider Electric shares were trading at 146.72 euros.
