Advantages and Disadvantages of a Public Limited Company

A public limited company is a voluntary association of members which is incorporated and, therefore has a separate legal existence and the liability of whose members is limited. This article features the advantages and disadvantages of a Public Limited Company.

Advantages of a Public Limited Company

1. Continuity of existence:

Constitutional wise, a Public Limited compan is the strongest of the entities of its kind. As the company is being governed by a Board, no individual interest will rule over.

2. Separate Legal Entity:

As the company has a Separate legal entity, the company can own debts and possess deposits.

3. Perpetual Succession:

Enjoys the privilege of perpetual succession and hence not affected by the death or other departure of any member and it continues to be in existence irrespective of the changes in membership.

4. Owning Property:

Being a legal entity the company can own, enjoy and alienate property in its own name. No shareholder can make any claim upon the property of the company so long as the company is a going concern.

5. Limited Liability:

This feature gives more security to its members, as in a limited liability company the liability of the members in respect of the company's debts are limited.

6. Borrowing Capacity:

As the company is bound to many legal requirements, the credibility of the company among creditors is very high.

7. Capacity to Sue and to be Sued:

Being a juristic person, the company can initiate a legal proceeding, while at the same time the company can be prosecuted.

The other benefits of a Public limited company are the dual relationship, a larger amount of capital, unity of direction and easy transferability of shares.

Disadvantages of a Public Limited Company

1. Being a Public Limited Company, the company is bound to disclose its trade statistics with its shareholders or members.
2. Involves a lot of compliance policies
3. Stringent regulations on the existence of the company, as the regulation comes one side from the normal registrationeeting of the member, whereas of Public Company must call its statutory Meeting and file Statutory Report.
4. Annual Return Compliance, a Public limited company has to disclose its annual earnings by filing returns to the stock exchange where it is listed
5. Scope for directo for personal profit
6. In the perspective of a promoter of a company, the total managerial remuneration cannot exceed 11% of the net profits and in the case of inadequate profits, a minimum shall be paid as desired in the Board Meeting. However, there are no such limitations in other types of companies.