PLC company?

[Edwin]

Does anyone know if having a PLC company allows for unrestricted or far less restrictive fund-raising? I know there are massive restrictions on LTD companies looking for investments...

 

[jasman]

There are far more restrictions on PLCs than Ltds, due to more stringent account auditing and the need to conform to the rules of the stock exchange in which the shares are listed. But this makes PLCs more attractive to investors and the PLC has the advantage that its shares can be bought and sold much more easily within the stock exchange mechanism. PLCs are also much more expensive to set up because you need to pay various professionals to handle the IPO. I believe it costs several £100k in fees.

You would probably also have to have 'independent' people chosen by the city who sit on your board, are on your payroll, and need to be consulted whenever you wish to make a major decision. These are to look after the interests of the shareholders, since a PLC will no longer be your company, it will be owned by all the shareholders.

 

[Edwin]

What I read so far suggested that you don't have to be listed on a stock exchange to have a PLC, you just have to commit to having £50,000 of share capital of which a minimum of 1/4 is actually paid for, and fulfil certain extra accounting requirements. It looked like you can actually incorporate as a PLC rather than an LTD if you don't mind spending the extra money and jumping through the additional reporting hurdles.

 

[retired_member34]

You can just set up a non traded PLC, you do not need to be traded on an exchange. The companies house website is pretty good these days, it explains it all in full (http://www.companieshouse.gov.uk/about/guidance.shtml). Check out the additional reporting requirements for a PLC, for example you cannot provide small or medium company accounts, regardless of the size of the PLC, and don't forget the higher level of fines (6 months late filing your accounts - £7.5K!).

Don't know how it affects funding though.

 

[namealot]

The type of shares/stock and agreement terms, were the and what type of PLC is set up, How you’re offering shares Brokers, DRIPS etc, without knowing them Its quite hard to say that the PLC is the best way..? If it’s solely for the purpose of raising funds it does have the potential to more avenues…

 

[Sussexite]

The key thing is that

a. only a plc can raise money from "the public" - an important defined term; and
b. if raising money from "the public" you have to issue a prospectus (huge expense, lots of advisors etc....to be avoided).

A way around this would be if you are raising money from a small number of friends and family or professional investors - but tread really carefully on this one.

(One of the reasons why many companies have a placing of their shares is that all the new shares are sold in the first instance to investment banks who don't count as "the public". The investment banks then release the shares into the open market.)

 

[jasman]

The whole advantage of forming a PLC is to facilitate funding via a stock exchange. It may be possible to set one up without listing it on an exchange but there would be no point in doing this (unless you just want the vanity of it looking like a bigger company). And there would be several disadvantages in terms of accounting restrictions, fees, higher fines as geomal says etc. So if the PLC were never floated it would effectively be a Ltd but with higher costs, greater restrictions and a lower profit margin.

 

[Edwin]

Ok, thanks for all the clarifications. I'm beginning to get a much better picture.

Would it be OK for a PLC to advertise its shares as available i.e. to solicit investment, even if that were ultimately in the form of a private share placement (i.e. not a stock exchange trade, but a sale of stock to an investment firm, angel group or VC fund)?

If so, that's one potential advantage over a Ltd company I suppose in that with a PLC you could in theory talk to anyone and everyone about raising finance.

That's assuming I'm understanding the situation correctly, of course.

 

[JMOT]

You can raise funds via VC's or anyone else for that matter with a normal Ltd company. Your accountants and lawyers can advise the easiest way of sorting out a shareholders agreement that suits all parties...

How do you think most companies function?

All Ltd companies have shares. Mine has 1 and I own it lol.

 

[Edwin]

You can raise funds via VC's or anyone else for that matter with a normal Ltd company. Your accountants and lawyers can advise the easiest way of sorting out a shareholders agreement that suits all parties...

How do you think most companies function?

Yes, of course you can raise funds via an Ltd company, but I was - am - guessing that you can't talk to literally anyone about wanting to raise funds if you're operating under an Ltd structure, without falling foul of all sorts of laws. You can only talk to "sophisticated" or "high net worth" investors, or institutional investors, I thought.

Whereas my limited research into PLCs suggests that in principle you can chat to anyone anywhere regardless of their "investor status" as defined by law.

 

[JMOT]

Yes, of course you can raise funds via an Ltd company, but I was - am - guessing that you can't talk to literally anyone about wanting to raise funds if you're operating under an Ltd structure, without falling foul of all sorts of laws. You can only talk to "sophisticated" or "high net worth" investors, or institutional investors, I thought.

Whereas my limited research into PLCs suggests that in principle you can chat to anyone anywhere regardless of their "investor status" as defined by law.

Define sophisticated lol... your local butcher could be a millionaire but not know EBITDA from a lamb shank if it jumped up and bit him... however theres not a law in the land that could stop you asking him for investment in your Ltd co in return for shareholding/equity etc and taking his money.

I'm always prepared to be proved wrong but you got to be kidding me that you couldnt for example put an ad in the sunday times business section saying "Established business, BLAH Ltd with proven cashflow in X sector seeking £100,000 in return for equity" and then talk to anyone that shows an interest.

How on earth you think small Ltd companies raise cash?

Maybe 5 minutes on the phone to your accountant is in order or just watch Dragons den lol

 

[Sussexite]

however theres not a law in the land that could stop you asking him for investment in your Ltd co in return for shareholding/equity etc and taking his money.



source....http://www.ukincorp.co.uk/s-66-offer-shares-by-company.html

Under the Financial Services Act 1986, as amended by the Official Listing of Securities (Change of Competent Authority) Regulations 2000, and in the Listing Rules of the Financial Service Authority (FSA), if securities are to be offered to the public in the UK for the first time before admission, the Listing Rules require that a prospectus is submitted to, and approved by, the FSA and that the prospectus is published.

An offer will be treated as being made to the public if it is made to any section of the public, whether chosen as already being members or debenture holders of the company, or as clients of the person issuing the prospectus, or in any other manner. There are exceptions to the rule, detailed in the Act.

Section 81 of the Companies Act prohibits a private limited company (unless limited by guarantee and without share capital) from making public offers. Generally, therefore, only a public limited company can issue a prospectus. A prospectus must be registered at Companies House on or before the day of its publication. The law requires only one copy to be delivered. Any supplementary prospectus adding to or correct the information in the original document must also be delivered immediately to the Registrar. Companies incorporated outside the United Kingdom which offer securities within the UK must also send a copy of their prospectus to the Registrar.

 

[JMOT]

in one simple word... "bollocks"

I think the definition of a public offering is open to much debate and interpretation...

if I want to go and speak to people about investing in my company I'm damn well gonna. I'll go to seed camps, angel investor functions, banks, VC's anyone who'll listen. If I want I'll write a carefully worded ad and take a whole page ad in a trade journal. Hell I'd even post the opportunity in forums...Nobody is going to stop me or give a rats ass...

Jeezus even businesslink which is govt backed advises companies how to go about seeking investment..

Edwin just look at all the VC vultures circling at Angies parties...

 

[disruptive]

a Ltd co. is fine for raising funds. Having been in one that was Angel and VC backed, it works quite well. The accountant did have fun with the companies house forms - but all is doable and reasonable and normal. I don't think one needs to go near PLC until the size of the company and complexity warrants it.

 

[crabfoot]

I think there's some advantage with a plc if you have money sitting around.

I don't actually understand this, but I once worked for a plc developing new pharmaceutical products. The company was funded by venture capital, had millions sitting in the bank while the research was going on, and would not have any way of making money until it had been going for five years and could license its products for sale.

I am sure that the company would have been easier to set up as a normal limited company, it was only paying salaries and running costs for a small staff - outgoings would have been around £300k/year. So the only rational conclusion is that there were tax breaks in operating as a plc, while the company had money in the bank and was not producing income.

The company eventually used its liquid assets to "merge" with another company in financial difficulties (that actually had real products) and is now a successful listed plc.

 

[BREWSTERS]

What I read so far suggested that you don't have to be listed on a stock exchange to have a PLC, you just have to commit to having £50,000 of share capital of which a minimum of 1/4 is actually paid for, and fulfil certain extra accounting requirements. It looked like you can actually incorporate as a PLC rather than an LTD if you don't mind spending the extra money and jumping through the additional reporting hurdles.

This is correct.

The advantages of going for a PLC, are;

1. The increased financial reporting required over a LTD, allows more confidence for any potential investors (private or public) or creditors.
2. The fact there is a reasonable amount of paid up capital lends a PLC the benefits as in 1.

Basically, choosing a PLC over a LTD (when you have no immediate intention of floating shares) shows the world you're serious.

 

[jasman]

This is correct.

The advantages of going for a PLC, are;

1. The increased financial reporting required over a LTD, allows more confidence for any potential investors (private or public) or creditors.
2. The fact there is a reasonable amount of paid up capital lends a PLC the benefits as in 1.

Basically, choosing a PLC over a LTD (when you have no immediate intention of floating shares) shows the world you're serious.

I wouldn't agree with you there. Those two 'advantages' amount to red tape and can easily be emulated by Ltd companies.

Any Ltd company can pay extra to have the same depth of financial accounting as a PLC but most would avoid this expense. However, large Ltd companies seeking substantial investment do pay for this depth of accounting as their potential investors require this to make their decision.

As for having £50k/ £12.5k paid up share capital, any Ltd can do this if it wishes. Most don't because it's less common for Ltd company shares to be sold so they tend to leave the share capital as it was when the company was formed. But most Ltd companies have more than this amount of capital and if they wished they could fill out a simple Companies House form to create extra shares which could then be sold to investors.

I take the point that the financial reporting and the share capital would provide a higher minimum standard than that required by Ltd companies which may make it easier for investors to decideto invest. But Ltd companies could emulate this so these are not really advantages that PLCs have over Ltds.

The primary advantage of a PLC over a Ltd - the thing that a PLC can do which a Ltd cannot emulate - is list its shares on an exchange, enabling the company to tout for investment on a grand scale in a stock market where there are many investors with £billions to invest, actively looking for investment opportunities. As a previous poster stated, the actual IPO process itself guarantees the company substantial investment because the shares are underwritten by an investment bank.

 

[BREWSTERS]

I was just going off the example of the company my brother started - he changed from a LTD to a PLC for the reasons stated in my previous post.