What types of company are there in the UK?
When people speak about companies, they could in actual fact be talking about a number of different entities.
One of the primary functions of the different types of company is to make clear how much liability the owners, shareholders or members are subject to if the company needs to be wound up for any reason.
There are also different legal requirements associated with the various sorts of company entities which can be created in the United Kingdom.
In the UK, there are four ‘standard’ types of company:
- Public Limited Company (PLC)
- Private Company Limited By Guarantee
- Private Company Limited By Shares
- Private Unlimited Company
There are also a handful of specific types of non-standard companies that we will cover briefly at the end of this article.
First, let’s look at each of the four different types of standard company in more detail.
Public Limited Company (PLC)
A public limited company, often shortened to just ‘public company’ or abbreviated to PLC, is usually a large business that has made shares available to the general public through the stock market. The amount of liability that shareholders and directors are subject to is limited to the amount that remains unpaid on any shares that they hold in the company.
Some public limited companies that you will have heard of include BAE Systems PLC, British Airways PLC, Vodafone Group PLC and Unilever PLC.
Such businesses usually start out as private companies before evolving into PLCs. In order to become a public limited company, a business must have share capital of £50,000 or more, of which at least 25% must have been paid for before the PLC can legally begin trading. Public limited companies are also required to have at least two directors and a company secretary.
Not all public limited companies are listed on a stock exchange. Shareholders often choose to incorporate as a PLC because they intend to list in the future, or in order to appear larger and have greater financial backing. Being a shareholder in a PLC is often seen as being more prestigious than being a shareholder in a private limited company.
Of the four different types of standard company listed above, only public limited companies are allowed to raise funds by selling shares or debentures to the public.
Private Company Limited By Guarantee
A private company limited by guarantee limits its guarantors’ liability to a pre-agreed amount that they must pay in the event that the company is wound up.
Non-profit organisations such as charities, clubs, student unions, societies and social enterprises are typical entities that use this type of company to set a low limit to the amount that directors or members must pay if something goes wrong.
There is no share capital, and therefore no shareholders, in a private company limited by guarantee. Members of the company are guarantors and are often only liable for a nominal sum such as £1 if the company is wound up.
Private Company Limited By Shares
With over two million registered at Companies House, private companies limited by shares are the most frequently-seen type of company in the UK and Ireland. They are more commonly referred to as private limited companies and must have the word ‘Limited’ or the abbreviated suffix ‘Ltd.’ at the end of their name.
One of the main reasons why this particular type of company set up is so popular is that, like public limited companies, the amount that shareholders are liable for in the event that the company is wound up is limited to the amount of any unpaid shares that they own. In contrast, a sole trader is personally liable for all debts associated with their business so their personal assets can be called upon.
Unlike public limited companies there is no minimum capital requirement with private companies limited by shares, so many are set up with a very small capital investment. Around 9 in 10 private companies in the UK are classified as small or medium sized companies, meaning that they can submit a simplified set of accounts to Companies House.
Private Unlimited Company
There are not that many private unlimited companies, relatively speaking. There is no cap to the amount that its members are required to pay if the company is wound up, so they tend to be used for companies where insolvency is a very low risk.
Another important factor for private unlimited companies is that they are not required by law to submit annual accounts to Companies House. This makes unlimited companies attractive to businesses that wish to maintain a level of secrecy about their financial status.
Special Types Of Limited Company
In addition to the four main types of public and private companies we have detailed, there are also a few specific non-standard limited company entities. These are: Community Interest Companies (CICs), Right to manage companies (RTMs) and Societas Europaeas (SEs).
Let’s look at these briefly:
Community Interest Company (CIC)
Community Interest Companies are set up for businesses that seek to be of benefit to the community rather than the shareholders or members of the company. They can be either public or private and can be limited by share capital or guarantee.
Some examples of the type of entities that set up as Community Interest Companies include housing associations, community development trusts and leisure centres. Charities and political parties cannot be set up as CICs.
In order for regulators to allow an entity to become a CIC it must meet some criteria which show it is in fact being established for the benefit of the community and that its assets and any profits will be used for community purposes.
Right To Manage Company (RTM)
A Right To Manage company (RTM) is set up to transfer powers for such things as the maintenance and repair work of a building from the landlord to the leaseholders. All RTMs must be set up as a special kind of private company limited by guarantee.
Societas Europaea (SE)
Societas Europaea, or SE companies, are business entities that can be established in all European Economic Area. When established in the UK, SEs are a type of public limited company which can be formed as a subsidiary of another company or as a holding company. SE companies can also be created by mergers or from an existing PLC.
SEs that are set up in the UK are required to have a registered office and a head office in the United Kingdom and must have a share capital of at least €120,000 (or equivalent).
We provide some useful documents which can help you set up or change the memorandum and articles of association for companies limited by shares and companies limited by guarantee. You can purchase them using the following links:
Please note that the information provided on this page:
- Does not provide a complete or authoritative statement of the law;
- Does not constitute legal advice by Net Lawman;
- Does not create a contractual relationship;
- Does not form part of any other advice, whether paid or free.
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Memorandum and Articles of Association: Limited Company (Ltd) by sharesPrice £18.00 Format Available: Read More
Articles of association: private company limited by guaranteePrice £18.00 Format Available: Read More
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