Why re-register as a public company
Private companies will usually want to re-register as a public company so that they can seek admission to a stock market and therefore be able offer its shares to the public and have them easily traded on the exchange.
Listing the company’s shares on a stock exchange (such as London’s Main Market or Alternative Investment Market) will enable the company to raise finance for its development, to make further acquisitions, to create a market and a value for its shares, to more easily use shares to incentivise employees and to enhance the profile of the company.
Some companies re-register but don’t then list on an exchange, believing that their reputation will be enhanced by trading with the ‘plc’ ending. However, this is less frequent due to the costs involved with the re-registration and the extra administrative burden for public companies may outweigh the perceived benefits.
Some of the restrictions faced by public companies include being subject to the Takeover Code (which would make a sale of the company more difficult), not being able to give financial assistance for the acquisition of its shares, additional requirements for paying dividends, not being able to pass written resolutions, the requirement for two directors and a company secretary (who must be appropriately qualified) and the holding of a formal annual general meeting.
How to re-register as a public company
In the UK the procedure for a private company to re-register as a public company is set out in sections 90 to 96 of the Companies Act 2006.
The private company must complete the Companies House application form, pass a special resolution (75% of its shareholders) authorising the re-registration and make changes to the company’s articles of association relevant for a public company, each of which must be filed at Companies House. If the company is aiming to be admitted to the Official List the articles will also need to comply with the requirements of the Listing Rules.
There are a number of share capital requirements to re-register, the main one being that the nominal value of the company’s allotted share capital must be not less than the current £50,000 authorised minimum. For its application a company must also obtain a balance sheet prepared as at a date not more than seven months before the date on which the application to re-register is delivered to the Registrar, an unqualified report by the company’s auditor on the balance sheet stating without material qualification the auditor’s opinion that the balance sheet has been properly prepared in accordance with the Companies Act 2006 requirements and a written statement by the auditor that, in his opinion, at the balance sheet date the amount of the company’s net assets was not less than the aggregate of its called-up share capital and undistributable reserves. The Auditing Practices Board has published guidance on auditors’ statements (including example reports) with respect to net assets which should be closely followed.