Back to Course

SS1: ECONOMICS - 2ND TERM

0% Complete
0/0 Steps



  • Do you like this content?

  • Follow us

Lesson Progress
0% Complete

A Public Limited Liability Company is established by a particular group of people. The number of people in the group is usually a minimum of seven (7) and has no maximum. Public Limited Liability Company has limited liability which lies in the value of money or funds each member has contributed to the business. They can sell their shares to the public either privately, during an initial public offering, or through trading on the stock market, and dividends must be paid to members. The people that purchase shares or subscribe are called Shareholders. 

Characteristics of Public Limited Liability Company

A public limited company is very different from private limited companies; however, both are in business for profit making. The Following are the various features of a PLC

  1. The number of shareholders ranges from seven to infinity
  2. The business is a separate legal entity
  3.  The business has perpetual existence. The company’s existence is independent of the death, bankruptcy, or insolvency of any of the members.
  4.  The members enjoy Limited liability 
  5. Capital is raised through the issuing of shares publicly
  6. They can sell their shares to the public
  7. The public limited company must have its account published
  8. They can issue debt certificates. 
  9. It must be properly registered in accordance with the Companies Act

Note: Debt certificates are considered a safer investment than stocks. A certificate of debt, also known as a bond, is a written promise issued by a government or company in order to raise money. It states the duration of the loan, the amount of principal, and the fixed interest rate

Advantages of Public Limited Liability Companies

  1. A high number of members result in the efficient management of services. 
  2. Large capital is involved because of the large number of shareholders in the company.
  3. Shareholders enjoy limited liability.
  4. The risk of the business is shared among members.
  5. The shares of the company are easily transferable for cash
  6. The business is a separate legal entity
  7. There is a high degree of specialization in a public company. 
  8. Employees could become co-owners by purchasing shares in the company.
  9. They can borrow funds for expansion.
  10. There is continuity of existence  

Disadvantages of Public Limited Companies

  1. The capital to form the business is very high.
  2. Often there is a delay in decisions on administration matters.
  3. There is an absence of  secrecy and privacy
  4. The rate of growth reduces to an extent due to instructions or laid down rules that are strictly followed either good or bad.
  5. Employees lack ideas or initiative to effect certain things in the process of performing their functions.
  6. Inefficiency and misappropriation may arise because no effort is made to avoid losses and corrupt  managers or directors may use that to embezzle the company 
  7. The shareholder cannot control the business.

Responses

Your email address will not be published. Required fields are marked *

back-to-top
error: