Does the UK Need the PLC? Moving Beyond Legal Form in Corporate Finance

Should a growing company be forced to change its legal structure simply to access public capital? And does it still make sense to tie significant regulatory obligations to a ‘public’ corporate form when large private companies can now remain private indefinitely?

I argue that ‘no’ is the better answer to both questions in an article forthcoming in the Cambridge Law Journal. 

Historically, the public limited company (plc) corporate form served two related functions. It acted both as a gateway to the public capital markets and as a legal ‘hook’ for imposing heightened corporate finance and governance requirements. The rapid expansion of private capital markets has fundamentally disrupted this model.

Today, private limited (ltd) companies can raise substantial amounts of capital from increasingly broad investor bases without ever changing their legal status. Fintech companies such as Monzo and Revolut have demonstrated that the traditional model is now obsolete, achieving multibillion-pound valuations while remaining ltd companies. Corporate form is no longer an effective barrier to scale, investment, or shareholder liquidity.

Yet UK company law still technically requires a company to convert into a plc before it can offer its securities to the public. This rule has become a trap for the unwary and sits uneasily with increasingly flexible approaches to business finance and liquidity at different stages of a company’s development.

Recent regulatory innovations illustrate the broader policy shift away from treating corporate form as the key determinant of market access.

• The Public Offer Platform (POP) enables companies outside the public markets to raise seed or growth capital from a broad investor base without incurring the cost of a full prospectus.
• The Private Intermittent Securities and Capital Exchange System (PISCES) allows privately owned companies to facilitate periodic trading of existing shares, providing shareholder liquidity without requiring a public listing.

Now, if the statutory prohibition on public offers by private companies were no more than an outdated but occasional inconvenience that well-advised founders and funders can work around, it would not, standing alone, justify prioritising legislative reform. The argument for repeal instead depends additionally on a wider set of considerations.

The plc corporate form has also ceased to function as a convincing trigger for heightened corporate finance and governance regulation. Using legal form rather than economic reality has become increasingly difficult to justify for at least three reasons.

First, the distinction is too blunt. Corporate ‘publicness’ is no longer binary but exists on a spectrum. Large privately owned ltd companies may have thousands of investors, significant economic importance, and substantial governance risks. By contrast, many unlisted plcs are little more than special purpose vehicles (SPVs) established for debt issuance and have no dispersed shareholder base at all.

Secondly, the distinction is increasingly irrational. It is difficult to justify imposing additional regulatory burdens based on a company’s theoretical ability to access public markets rather than on whether its securities are in fact traded publicly.

Thirdly, the current framework creates unnecessary distortions. Companies that convert to plc status early as a precaution to preserve future financing flexibility can find themselves subject to regulatory burdens that their similarly situated ltd competitors avoid. One example is exclusion from simplified small companies financial reporting regimes.

Moving beyond the plc as an important organising concept for regulatory calibration would create opportunities for sensible corporate law simplification. The paper identifies three relatively straightforward reforms.

• Abolish minimum capital requirements. The £50,000 minimum capital requirement for plcs has remained unchanged since 1980 and provides little meaningful creditor protection. Removing it would particularly benefit financing SPVs. Ireland has already adopted a more flexible approach through the Designated Activity Company (DAC), which has become a popular debt-issuing vehicle despite requiring only €1 in minimum capital.
• Extend simplified capital reductions. The solvency statement procedure currently available to ltd private companies for reducing share capital could readily be extended to all companies.
• Repeal the financial assistance prohibition. Preventing plcs from providing financial assistance for the acquisition of their own shares is increasingly difficult to defend when very large ltd private companies presenting identical commercial risks remain outside the prohibition. Directors’ duties and insolvency law provide a more coherent framework for addressing these concerns.

At the same time, abandoning the plc/ltd distinction would not necessarily mean less regulation. In many areas, this reform could support better, more-effectively targeted regulation.

Instead of relying on corporate form, regulatory obligations could be triggered by functional criteria such as company size, employee numbers, ownership dispersion, or whether securities are actually traded on a public market. This would ensure that regulation applies where genuine risks arise, rather than according to formal legal labels. It would also eliminate the current anomaly whereby some economically significant ltd companies fall outside regulatory requirements while much smaller plcs remain subject to them. 

To be clear, there is nothing radical about this suggestion. Company size, trading status and ownership structure already determine the application of many regulatory requirements. The proposal is simply to retire one trigger that has become increasingly irrational and rely instead on functional criteria that better reflect the risks regulation is intended to address.

In short, eliminating the company law statutory prohibition on public offers by ltd private companies and locating securities regulation exclusively within capital markets law would remove an increasingly artificial distinction. Doing so would also provide an opportunity to simplify company law, support innovation, and better align the UK’s corporate finance framework with the realities of modern capital markets.

Postscript: my paper is UK-focused and it was finalized before the publication of the EU Inc proposal. Even so, this blog provides a timely opportunity to commend the EU Inc for proposing both to decouple access to capital markets from corporate form and to eliminate outdated legal capital requirements. This proposed universality is consistent with my argument that corporate form should no longer be used as a determinant for access to capital markets and/or as a trigger for regulatory escalation. There is a certain irony in this. The UK originally created the plc form as a means of confining the more burdensome requirements under (now) EU company law to a sub-set of companies. It may now have something to learn from the EU’s ambitious vision of a single corporate form that can support a business through every stage of the corporate lifecycle. 

The author’s paper is available here, as a working paper. It is also forthcoming in the Cambridge Law Journal. 

Eilís Ferran is Professor of Company and Securities Law, University of Cambridge.

This post is part of the OBLB's series of posts on the EU Inc proposal.