Business Ownership Public Limited Companies
Public Limited Companies • Use the abbreviation (PLC) after their names. Eg. NEXT Plc, Halifax Plc etc. • Usually large national / international businesses. • The owners of the business are shareholders. • People (over 18) or other businesses that pay money to a PLC in return for part ownership (a share) • Shares in PLC’s are available on the stock exchange and can be bought or sold at any time.
Setting up a PLC. • A PLC needs to have at least £50,000 invested in it. • Any type of business (sole trader, partnership, co-operative etc) can become a PLC as long as £50,000 in raised through shares. (floatation) • Original owner may lose ownership of the business if holds less than 50% of the shares. • There needs to be 2 or more owners (shareholders). The maximum amount of shareholders can be unlimited.
Setting up a PLC. • Two docuements need completing by a PLC • Articles of Association • Memorandum of Association
Running a PLC • Although shareholders own a PLC they will probably not run it on a day to day basis. • A Board of Directors are formed who look after the business, who in turn hire managers / staff to run the different parts of the business. • Shareholders elect who will be on the Board of Directors.
BODs and Shareholders. • Every year the PLC needs to hold a AGM (Annual General Meeting) were the board of Directors have to explain to the shareholders (owners) what: • They have done with the business over the last year, • how successful the business has been and • what they plan to do next. • The shareholders get 1 vote for every share they hold and are allowed to vote on policies that the Board want to do.
Shareholder Power • The shareholders get 1 vote for every share they hold and are allowed to vote on policies that the Board want to do. • If you own 50% of the total shares you have overall control of the business and effectively “own” it. • If someone buys 50% of the shares they can ‘takeover’ the business. (e.g Manchester Utd) • All shareholders have legal right to see the business’s finances each year. • Because of this the business affairs of the business have to made public by law.
Company Profits • The company owns all the assets of the business. Not the shareholders or B.O.D’s • The company pays corporation tax. • Any profits are then either: • Shared between the shareholders and they are paid dividends, or • It reinvested into the business. • If the company makes more profit then the share price will go up, making shareholders more money.
Liability • Shareholders have unlimited liability as they are separate to the business. • The Board of Directors and managers of the business are employees and will probably only lose their jobs in the business collapses. • The business itself will be sold and any money raised will be used to pay off its debts.
Life of a PLC • In theory a PLC can last forever. • The death of shareholders doesn’t affect it • There are allows other people who want to own the shares and become shareholders to own it.