Public vs. Private Limited Companies

In the UK, private limited companies (LTD) account for around 96% of all corporate body types, but it’s also beneficial to understand the public limited company (PLC) structure. This article explores private and public companies, highlighting their key features, differences, and similarities.

Key takeaways

Private and public limited companies share many similar traits, but the main difference is that PLCs can sell shares to the public on a stock exchange.
Unlike private companies, PLCs require a minimum share capital of £50,000 and must obtain a trading certificate before they can start trading. They must also have at least two directors and a qualified company secretary, while private firms need only one director and a secretary is optional.
Both company types must be incorporated at Companies House. However, private companies can be limited by shares or guarantee, while PLCs must be limited by shares.

Differences between a private limited company and a public limited company

The principal difference between a private limited company (LTD) and a public limited company (PLC) is that a PLC can (but has no obligation to) offer its shares to the public on a recognised stock exchange. A private company can only sell or gift its shares privately – it cannot trade on the stock market.

Making shares available to the public means it’s generally easier for a PLC to raise capital and facilitate growth than its private counterpart. Furthermore, thanks to the open nature of stock exchanges, PLCs can often obtain more funding than private firms.

The advantages of a public company centre on its ability to raise significant capital by offering shares to the public, and the prestige that comes with this. The drawbacks of a PLC are the more stringent regulations and additional reporting, corporate governance, and disclosure requirements.

There are other differences to consider other than being able to sell shares to the public. Below, we look at some of the most notable ones:

1. The people in the company

Under the Companies Act 2006, a PLC requires a minimum of two directors, one shareholder (member), and a fully qualified company secretary. Company directors can also be shareholders and secretaries (if they meet the qualification requirements), so it is possible to set up a PLC with just two people.

Meanwhile, a private company requires a minimum of one director and one shareholder. The same person can hold both positions, meaning you can form a private company with just one person. Moreover, there is no legal requirement to appoint a company secretary, but many companies benefit from doing so.

In both company types, the directors must be at least 16 years old, and at least one director must be a natural person (as opposed to a corporate entity).

A public limited company cannot start trading or exercise borrowing powers until it obtains a trading certificate from Companies House. This should not be confused with the certificate of incorporation – they are two different things.

To be eligible to receive a trading certificate, the aggregate nominal value of a public company’s allotted share capital must be at least £50,000. This is known as the ‘authorised minimum’. At least 25% of the nominal value of its shares (and the whole of any premiums on them) must be paid up, meaning that a PLC cannot engage in trading activity until at least £12,500 has been paid into the business.

A private company does not need a trading certificate or a minimum share capital. It can begin trading immediately after incorporation, regardless of whether any money has been paid into the company.

3. Company reporting requirements

Typically, public companies can’t file abbreviated accounts (a simplified version of their annual accounts) with Companies House. Their accounts are subject to audit unless the company is dormant.

On the other hand, many private companies can file abbreviated accounts and are often eligible for audit exemption.

A PLC must deliver its statutory annual accounts to Companies House no later than 6 months after its accounting reference date (ARD). This date signifies the end of a company’s financial year.

A private company must file its accounts no later than 9 months after its accounting reference date.

4. Late annual accounts penalties

If a PLC misses its deadline for filing annual accounts, it will incur higher late filing penalties than a private company, as illustrated in the table below. The fines will double if a company (whether LTD or PLC) delivers late accounts 2 years in a row.

How late?	Private limited company	Public limited company
1 month or less	£150	£750
1 month – 3 months	£375	£1,500
3 months – 6 months	£750	£3,000
9 months or more	£1,500	£7,500

Although PLCs can generally carry out a buyback of shares (also known as purchase of own shares), they are not permitted to buy back their shares out of capital.

In a share buyback, the company purchases its own shares back from a shareholder, either to be sold on or cancelled. A company can fund this in several ways, one of which is out of capital.

However, the option to fund a buyback out of capital is only available to private firms, provided there are no restrictions in the company’s articles of association.

6. Annual general meeting (AGM)

By law, a public company must hold an annual general meeting (AGM) no later than 6 months after its accounting reference date. As the name suggests, a PLC must hold an AGM at least once a year.

A private company does not have to hold an AGM or any other meetings unless its articles of association state otherwise.

7. Members’ liability

A private company can be limited by shares or limited by guarantee, making it suitable for profit-making businesses, charities, and not-for-profit organisations. Each member’s liability towards the company’s debts is limited to either:

Any unpaid amounts on the issue price of their shares (usually the nominal value) – if the company is limited by shares
The guaranteed sum they agreed to contribute – if the company is limited by guarantee

PLCs, however, are always limited by shares, with each member’s liability toward company debts limited to any unpaid amounts on the issue price of their shares.

Similarities between private and public companies

While private and public companies differ in many ways, they also share several similarities. This section focuses on their comparable traits.

1. Requirement to incorporate at Companies House

Every limited company, whether a PLC or LTD, must incorporate (register) at Companies House – the UK registrar of companies.

The quickest and most straightforward way to set up a company is through a company formation agent, such as Rapid Formations. The entire process takes place online, with most incorporations approved at Companies House within 24 hours.

Once registered, the company becomes a legal entity separate from its directors and shareholders. The company’s details will be publicly available on the Companies House register.

2. Company name rules

The same company name rules and restrictions apply to private companies and PLCs:

A company name must be unique—it cannot be the same as (or too similar to) another company’s name on the register.
Private companies must include ‘Limited’ or ‘Ltd’ (or the Welsh equivalent) at the end of their name (unless exempt). Public companies must include ‘Public limited company’ or ‘PLC’ (or the Welsh equivalent) at the end.
The name must not be offensive.
A company name cannot contain any ‘sensitive’ words or expressions or suggest a connection with government or local authorities unless they have permission from the relevant authorising body.

GOV.UK provides detailed guidance on choosing a company name.

3. Limited liability

As mentioned earlier, shareholders in PLCs and private companies are only liable for company debts up to the issue price of their shares. The issue price is often the nominal value of the share, usually £1.00.

If the company encounters financial difficulties, the shareholders are only personally liable for the amount they have agreed to pay. Their personal assets (e.g. property and savings) will be safe from creditor claims.

However, because the initial shareholders in a PLC need to invest a minimum of £12,500 in the company to facilitate trading, their liability is generally higher than that of shareholders in an LTD.

4. Memorandum and articles of association

Both company types must adopt a set of articles of association during incorporation. This document is the company’s primary constitutional document, determining the rules that directors and members must follow. The content and exact structure of the articles of both company types may differ, but the basic premise remains the same.

Companies House creates a memorandum of association during the company formation process. This essential document confirms that the shareholders intend to register a company, become members, and take at least one share each.

5. People with significant control (PSC) obligations

PLCs and LTDs must keep information on their people with significant control (PSCs) and report it to Companies House. PSCs are the people who have significant control of the company.

Whilst it is possible for a company not to have any PSCs (i.e. where no one meets the relevant conditions), most companies have them. They’re usually the shareholders.

That said, PLCs who have shares admitted to certain stock exchanges are exempt from needing to maintain records of their PSCs.

6. Reporting duties

Every company must prepare the following filings for Companies House each year, whether a PLC or LTD:

An annual confirmation statement, which verifies key information about the company
Annual accounts, which report on the company’s financial activity over a certain period (usually the past 12 months)

Both company types must also notify Companies House when specific details change. This includes changes to the registered office address and director appointments and resignations.

7. Company officers and shareholders

Whilst only a PLC must appoint a company secretary and at least two directors, the roles and responsibilities within both structures are essentially the same. The shareholders own the company, while the directors manage it on the shareholders’ behalf.

A company secretary advises directors on their duties and handles corporate governance and compliance requirements.

Thanks for reading

So there you have it – the main differences and similarities between private and public limited companies.

If you’re considering forming a company, we can help:

To register a public limited company, contact our Customer Service Team on 020 7871 9990 or message them via live chat for assistance and expert guidance.
To register a private company limited by shares or guarantee, browse our company formation packages—or contact our London-based team for assistance.

If you have any questions, please leave a comment below. Explore the Rapid Formations Blog for more limited company guidance and UK business advice.

Private vs. public limited companies

Key takeaways