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FACTFILE: GCSE BUSINESS STUDIES UNIT 1: Business Ownership

Public Limited Companies

Learning Outcomes , an advertising house sales house based in and a growing digital division At the end of this unit students should be able incorporating Simply Zesty and Tibus. to: • Identify, describe and evaluate public limited It also owns Sport, the UK’s biggest sports magazine companies as a type of business ownership. and has stakes in eight of the UK’s digital radio multiplexes.’

Setting the Scene Public limited company PLC

Like a private limited company, a public limited company like Wireless Group is an incorporated business and is therefore a separate legal entity During 2016, UTV media plc sold its from its owners. The owners of a public limited division to ITV plc and was renamed as Wireless company are its shareholders and each shareholder Group plc. enjoys the benefit of limited liability.

Wireless group is a leading UK and Irish media The key difference between a public limited company which is based in . ‘It comprises 16 company and a private limited company is that a radio stations across England and , including public limited company can offer its shares for sale , the world’s biggest sports radio station to the general public through a recognised stock and global audio partner of the , exchange. talkSPORT 2, and Virgin Radio, seven radio stations across the and

1 FACTFILE:FACTFILE: GCSEGCE HISTO BUSINESSRY OF STUDIES ART / ARCHITECTURE / CREATING A BUSINESS / BUSINESS OWNERSHIP

Advantages of operating as a public Disadvantages of operating as a public limited company limited company Raising Set costs A public limited company such as Wireless Group Setting up as a public limited company is a time can issue shares for sale to the general public and consuming and costly process as there are official therefore it should be able to raise more capital procedures to complete to ensure that the business than any other form of business enterprise. complies fully with UK company law.

Limited liability Divorce of ownership and control A public limited company is an incorporated In Wireless Group plc the shareholders are the business and therefore is a separate legal unit from owners of the company but it is the directors and its owners. This also means that any debts or losses managers who make the day to day decisions and accrued by the business are not the responsibility therefore it is they who control the company. This of the individual shareholders. Therefore, if a situation can cause difficulties if the objectives company such as Wireless Group were to run up of those who control the company differ from the huge debts, the individual shareholders would only objectives of those who own it. lose the money they had invested in the business. Less privacy Continuity Under UK law public companies such as Wireless Because Wireless Group has a legal existence Group are required to make certain aspects of separate from that of its owners it will not be their affairs available to the public for general affected if one particular shareholder decides to sell inspection. This information may help competitors his/her shares. Shares in public limited companies gain valuable insights into the operation and change hands regularly with very limited impact on management of the company. the operation of the business. Threat of takeover Specialisation Because shares in Wireless Group plc are offered for sale on a stock market, other firms may attempt to buy these shares and therefore gain control of the company. If this occurs against the wishes of the current board of directors it is known as a hostile takeover bid.

Public limited companies such as Wireless Group are generally large companies who can have a large number of directors or managers. This means that each manager can specialise in the area where they are best suited. This specialisation and division of labour should help Wireless Group plc become more efficient and productive.

2 FACTFILE:FACTFILE: GCSEGCE HISTO BUSINESSRY OF STUDIES ART / ARCHITECTURE / CREATING A BUSINESS / BUSINESS OWNERSHIP

Activity Revision questions Cafédirect 1. What do the letters PLC represent? [1] Cafédirect is the UK’s largest Fairtrade hot drinks 2. Where does a PLC such as Wireless Group plc sell company. Their brands, Cafédirect, Teadirect its shares? [1] and Cocodirect are sold through most of the 3. What advantages does a PLC have over a private major supermarkets. They buy from 40 producer limited company? [3] organisations in 14 countries, ensuring that over 4. List 3 PLC’s that operate in your local area. [3] a quarter of a million growers receive a decent 5. What is meant by the divorce of ownership and income from trade. control? [2] 6. How much would the shareholders of a PLC such The company was founded in 1991 by a number as Wireless Group lose if the company was to go of charities including OXFAM and Traidcraft. In bust? [2] 2004, the company successfully executed the UK’s biggest ethical public share issue to become a publicly listed company, raising £5 million from 4,500 investors which allowed the company to put in place ambitious plans for growth.

Over the past 8 years Cafédirect has won 30 great taste awards, with 7 of Cafédirect products winning the gold star in 2014.

1. What type of company was Cafédirect when it was formed in 1991? [1] 2. What type of company was Cafédirect after 2004? [1] 3. What do you think are the main reasons why Cafédirect would have wanted to make this change to its legal status in 2004? [2]

Key Terms • A public limited company is also a business which is incorporated and therefore separate legal entity from its owners, however a public limited company can offer its shares for sale to the general public through a recognised stock exchange. • A stock exchange is a market for the trading of financial assets such as company shares and bonds. • Limited liability means that individual shareholders are not personally liable for the debts of the company they are only liable for the amount of money they have invested in the company. Images © ThinkstockPhotos

© CCEA 2017