Private and Public Companies
Companies, both public and private When forming a company, the promoters must specify whether the company will be registered as a private or public company. A public company is one whose certificate of incorporation specifies that it is one (CA 2006, s 4(2)). Any firm that is not a public company is referred to as a private company (CA 2006, s 4(1)). The following are the main distinctions between a public and a private company: A public company may offer to sell its shares to the general public, and to facilitate this, it may offer to sell its shares on a stock exchange, with the London Stock Exchange serving as the major market in the United Kingdom. This enables public companies to raise large sums of money fast (for example, Facebook's initial public offering on Nasdaq allowed them to generate almost $16 billion in one day by selling shares). Private limited companies cannot offer their shares to the general public (CA 2006, s 755(1)) or list them on the official list (Financial Services and Markets Act 2000, s 75(3) and Financial Services and Markets Act 2000 (Official Listing of Securities) Regulations 2001, reg 3). As a result, private companies often have a tough time obtaining adequate cash. While private businesses can be formed with a little amount of money (e.g., a single 1 pence share), public companies must have an allocated share capital of at least £50,000 (s. With only one member, both private and public businesses can be formed. A public company, on the other hand, must have at least two directors, but a private company can be created with only one (CA 2006, s 154). Public companies must appoint a company secretary by law (CA 2006, s 271), although private firms are not obligated to do so (but may do so if they wish). The suffix 'Ltd' must be added to the name of private limited companies (CA 2006, s 59(1)). The suffix 'plc' is required for public companies (CA 2006, s 58(1)).
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