A public limited company is a type of company that has many shareholders and can sell its shares to the public. Here are some important things to know about public limited companies:
Characteristics of Public Limited Companies
It must have at least seven shareholders, but there is no limit to the number of shareholders.
Capital is raised by selling shares to the public.
Run by a board of directors elected by shareholders
Shares can be easily bought and sold by investors.
Can be listed or unlisted on stock exchanges
Becoming a Listed Company
To become a listed company in Malaysia, a public limited company needs a paid-up capital of at least RM60 million (for Kuala Lumpur Stock Exchange Main Board) or RM40 million (for KLSE Second Board)
If a company is not listed, it can still sell its shares to the public by publishing a prospectus.
Identifying a Public Limited Company
Public limited companies show their status by using the word “Berhad” or “Limited” with the abbreviation “Bhd.” or “Ltd.” after the company’s name.
Advantages of Public Limited Company
A public limited company is a type of business structure that has many benefits, including:
Limited Liability: Stockholders’ liability is limited to their investment in the company. This means they can’t lose more money than they’ve invested if the company suffers losses.
Perpetual Life: The company can exist for an indefinite period and has a separate and distinct life from that of its owners. Even if the owners change, the company can continue to operate.
Transfer of Ownership: Ownership can be transferred easily by selling stock to interested buyers.
Ease of Expansion: A public limited company can grow and expand easily without being limited by size.
Economies of Scale: Operational output is bigger, which enables the firm to enjoy economies of scale. This means it can produce more goods and services at a lower cost.
Securing Capital: Capital can be acquired through the issuance of bonds and shares of stock. Short-term loans can also be obtained against the assets of the business or personal guarantees of the major stockholders.
Expertise and Skills: The corporation can draw on the expertise and skills of several individuals, ranging from major stockholders to professional managers who are employed in the company.
Disadvantages of Private Limited Companies
However, there are also some disadvantages of a public limited company, including:
High Set-up Costs: A large amount of organizing expenses is involved in forming a corporation.
High Taxation: Various taxes must be paid by the company.
Agency Problem: The company is normally run by professional managers who may sometimes have different interests than the owners.
Regulations: The state and federal agencies require extensive government regulations and reports, which often result in a great deal of paperwork and bureaucracy.
Restriction of Activities: Corporate activities are limited by the charter and by various laws.
Financial Disclosure: When a company’s publicly traded stocks, investors can examine the corporation’s financial data within certain limits. This may force the firm to disclose more information about its operations and financial status than it would desire.