20 MARKSContrast a Private Limited Company LTD with aPublic Limited Company PLC as a form ofBusiness Organisation.
Question
20 MARKS
Contrast a Private Limited Company (LTD) with a Public Limited Company (PLC) as a form of Business Organisation.
Solution
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Ownership: A Private Limited Company (LTD) is owned by a small group of people who are closely held, often family members or friends. On the other hand, a Public Limited Company (PLC) is owned by the public who buy shares through the stock exchange.
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Share Transferability: In a LTD, shares cannot be freely transferred between members and the public without the agreement of other shareholders. In a PLC, shares can be freely bought and sold by the public on the stock exchange.
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Number of Shareholders: A LTD can have a minimum of two shareholders and a maximum of 50, excluding employees. A PLC must have a minimum of seven shareholders and there is no maximum limit.
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Disclosure of Information: A PLC is required to disclose more information to the public, including annual accounts and reports, due to its public nature. A LTD has less stringent requirements and does not need to disclose as much information.
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Capital: A PLC can raise capital by selling shares to the public and can therefore potentially raise more funds than a LTD. A LTD can only raise capital from its existing members and any new members they agree to admit.
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Legal Formalities: A PLC has more legal formalities and regulations to comply with due to its public nature. A LTD has fewer legal formalities and regulations.
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Continuity: A PLC has perpetual succession, meaning it continues to exist even if all its members die or desert it. A LTD does not have perpetual succession and can be easily dissolved.
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Management: In a PLC, management is usually separated from ownership. The shareholders elect a board of directors to manage the company. In a LTD, the owners often manage the company themselves.
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Liability: In both types of companies, the liability of the shareholders is limited to the amount unpaid on their shares. However, in a PLC, due to the larger number of shareholders, the risk is spread out more.
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Public Perception: PLCs are often perceived as more reputable and stable due to their size and the regulations they must comply with. LTDs may not have the same level of public trust.
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