Ltd vs Plc: Key Differences in Corporate Structure

Features of Ltd Companies

• Ownership: Usually small to medium-sized companies owned by a small group of people or family members.
• Capital: A share capital of usually £50,000.
• Investment: Private investors are attracted to issue shares.
• Transferability: Shares in Ltds cannot be sold without the authorization of other shareholders.
• Naming: Must include the suffix 'Ltd' after the company name.

Features of Plc Companies

• Capital Raising: Can raise huge amounts of capital by issuing shares to the general public.
• Liquidity: Once issued, shares are traded on the stock exchange, making them more attractive to investors as they are easier to offload.
• Administration: Higher administrative costs and a significant loss of privacy.
• Scrutiny: Under constant research by the financial press and analysts, which can have adverse effects on share prices.
• Governance: By law, all companies must hold an Annual General Meeting (AGM). Any person who owns shares can attend and vote; other stakeholders may attend, but only ordinary shareholders have voting rights.

Important Note on Financial Reporting

All companies (Ltd and Plc) must submit annual financial statements by law. However, Plcs must submit a much greater volume of financial and non-financial data as part of their annual report.

Ordinary Shares vs. Preference Shares

Ordinary Shares

• Voting Rights: Owners are called ordinary shareholders and have the right to attend company meetings and vote.
• Dividends: There is no guarantee of dividend payments, as they are not compulsory by law. However, there is no maximum limit to the dividends they can receive.

Preference Shares

• Voting Rights: Owners are preference shareholders. They have the right to attend meetings but hold no voting rights.
• Fixed Dividends: They receive a fixed amount of dividends irrespective of profit levels.
• Priority: They receive dividends before ordinary shareholders.
• Liquidation: In the case of insolvency or liquidation, they receive their capital before ordinary shareholders.

Debentures

A debenture is a loan taken out by a limited company.

Features of Debentures

• Interest: A fixed rate of interest is paid by the company to the investor annually.
• Compulsory Payment: Interest must be paid regardless of whether the company makes a profit (compulsory by law).
• Security: Debentures are often secured on the fixed assets of the business, making them a safer investment.
• Priority: If the company faces financial difficulties, debenture holders are among the first claimants to be paid.