Becoming a PLC without a listing

A competitor has become a plc, and your suppliers and customers are impressed. But the company isn’t in the Financial Times and the only thing that seems to have changed is their stationery. Here’s how they did it

Stock market floatation is not necessary

It’s a common misconception that to be a plc you have to float your company on an exchange like the Stock Exchange, the Alternative Investment Market or PLUS, with all the complexity and expense a flotation entails. You don’t.

Provided it complies with a few extra company law rules, any private company can re-register as a public company yet continue to operate almost exactly as it did before.

It can stay privately owned, and keep exactly the same restrictions on issues and transfers of shares that it had as a private company, so you stay in control.

Practically, the big difference may be that its sales go up, and it can often agree better terms with its suppliers, because it has the magic ‘plc’ at the end of its name.

Private versus public

The main differences between a private company and a public company are:

• A public company must have issued at least £50,000 worth of issued shares, or its euro equivalent. Only one quarter of the amount due needs to have been paid up on each share (plus any premium payable). That means a company can re-register as a public company with a paid up share capital of only £12,500 or its euro equivalent.
• It must have two directors (a private company can have just one. And the company secretary must be someone with a professional qualification (eg a lawyer, accountant, banker, etc) or someone the directors believe is competent to be the secretary.
• The company must file full accounts (not abbreviated) and is slightly more restricted in the funds it can use to pay dividends.
• The technical rules that apply when a company issues, redeems or buys back shares from a shareholder are different.

Increasing your issued share capital

If the company doesn’t have £50,000 (or its equivalent in euros) worth of issued share capital, you can sometimes issue new shares without the existing shareholders having to find the money to pay for them.

Instead, if the company has enough retained profits, they can be used to pay for an issue of sufficient new shares to bring the issued share capital up to the required amount.

The effect of such a ‘bonus’ or ‘capitalisation’ issue is simply that profits previously available to pay out as dividend are converted into share capital in the balance sheet.

Any revaluation reserve in your accounts (eg premises you own have been valued upwards in the books) and/or share premium account can also be used.

Plc paperwork and procedures

In any event, you must pass board and members’ resolutions to re-register, and file various documents at Companies House, including: 

• a set of audited accounts (that mustn’t be more than seven months old)
• an unqualified report on those accounts by the auditor, and a written statement by him as to the company’s financial position
• formal resolutions of the shareholders to re-register and make appropriate changes to the company’s name and articles
• if the company does not already have a company secretary, a statement of the company’s proposed secretary and their consent to act
• a statement that the requirements of the Act have been complied with
• the Companies House fee

If you do need to issue new shares, you will need to hold board and shareholder meetings to pass the resolutions to issue the new shares first, and tell Companies House that you have done so. Resolutions to issue shares and to re-register can all be passed at the same set of meetings.

The moment a new certificate of registration is issued by the Registrar of Companies (which can be arranged on a same-day basis) you’re a plc. If you’ve planned to combine the re-registration with a re-brand, for a big promotional splash, you can now proceed.

You’ll need to change your name wherever it appears (on stationery, order forms, your website, marketing literature, vehicles, signage, uniforms, etc) but your contracts and legal obligations are unaffected because you’re the same company as before – you just have a new legal status.

Always take legal advice.