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Advantages and disadvantages of a public limited company

Written by Johnathan Korchak

Published in Company formation on April 17, 2024

7 comments | Tags: business types , plc

A great number of businesses choose to incorporate as a company limited by shares. That contrasts with other forms of business, such as the sole trader , partnership , limited liability partnership (LLP) or company limited by guarantee .

Most companies limited by shares are set up as private companies. However, in this article we look at the advantages and disadvantages of a public limited company . As well as those forming new companies, a proper evaluation of the advantages and disadvantages of a public limited company will be needed for an existing private limited company considering converting to a plc.

As ever, if you’re at all unsure about the best course of action, we’d strongly suggest you speak to your solicitor or accountant. They can give you detailed information and advice that takes account of your personal circumstances.

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An important part of managing an unlisted plc in the UK is keeping its statutory books and filings up to date. Inform Direct is the perfect tool to help make this task a whole lot easier , meaning you can focus more on running your business.

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Public limited company advantages

As a limited company, a plc shares the advantages of a limited company with its private counterpart. But there are also specific features of a public limited company that provide unique advantages:

1 Raising capital through public issue of shares

The most obvious advantage of being a public limited company is the ability to raise share capital. The widest opportunities to market shares are available when the company is listed on a recognised exchange.

With certain restrictions, a public limited company can sell its shares to the public and anyone is able to invest their money. Therefore, the capital that can be raised is typically much larger than a private limited company.

It’s also possible that having stock listed on an exchange could attract investment from hedge funds, mutual funds and other institutional traders.

2 Widening the shareholder base and spreading risk

Offering shares to the public gives the opportunity to spread the risk of company ownership among a large number of shareholders . This may allow early investors in the company to sell some of their own shares at a profit while still retaining a substantial stake in the company.

Obtaining capital from a wide range of investors has some advantages over relying on one or two ‘angel investors’, as many private companies will choose to do to facilitate growth. An angel investor may provide a large amount of capital and expertise. However, the founders may not be comfortable with the level of influence over the company’s direction that the angel will often expect.

3 Other finance opportunities

As well as share capital, a public limited company will often find itself in a better position when looking at other potential sources of finance.

There are additional demands upon public limited companies. Those companies maintaining a stock exchange listing will face additional requirements. These additional compliance obligations can help to improve a company’s creditworthiness when issuing corporate debt. That will in turn reduce the return the company needs to offer investors.

Banks and other financial institutions may be more willing to extend finance to a public limited company, particularly one that is listed. The company could also be in a better position to negotiate favourable interest rates and repayment terms on loans.

4 Growth and expansion opportunities

The value of being able to raise finance is in how it can be employed to serve the business. By virtue of the additional finance that may be available to a public company, it can be in an better position to:

• Pursue new projects, new products or new markets
• Make capital expenditure to support and enhance the business
• Make acquisitions (whether in cash or by offering shares to the shareholders of the target business)
• Fund research and development
• Pay off existing debt (or replace existing debt with new debt on better terms)
• Grow organically

5 Prestigious profile and confidence

Whether deserved or not, having ‘plc’ at the end of a company name can add standing and prestige. There is a sense of status about a public limited company that its private company counterpart just doesn’t quite have. This can influence how the business is viewed. While often more imagined than real, this perception of being more established, larger or more powerful can affect the behaviour of customers, suppliers and employees.

More people are likely to be aware of the company if it is public. That’s particularly true if it’s listed on a stock exchange. In that case, it’s more likely to receive attention from the media and investment professionals. This is effectively free publicity, meaning more people will recognise the company and its products or services. Better brand recognition can lead to more sales. It may also make you more visible to valuable potential business partners.

Credibility and confidence are reinforced by:

• Operating under a stricter legal regime than private companies in many areas
• Higher share capital requirements
• Greater transparency (for example, in the required form of accounts)
• For listed companies, the indirect endorsement of having their shares listed on a recognised exchange

Again, these factors can affect the behaviour of (potential) shareholders, customers and business partners.

6 Transferability of shares

The shares of a public limited company are more easily transferable than those in the private equivalent. This means shareholders benefit from liquidity. If shares are quoted on a stock exchange, shareholders and potential shareholders will generally find it easier to transfer shares in the company. However, the market still relies on willing purchasers and sellers being available and trading in many public companies is still infrequent.

The fact the shareholders are less bound to remain with the company can give them comfort. This may help the company by making people more willing to invest in the first place.

Additional restrictions on transferability of shares often apply in private companies. Without these, it’s also easier to deal with situations like a shareholder’s death , allowing shares to be transmitted in line with the terms of any will.

7 Exit Strategy

Going public can enhance the options for the founders to exit the business at some point in the future, if they wish to do so. Both higher transferability of shares and the increased visibility of the business and its performance may increase the chances of bid interest from potential suitors.

Public limited company disadvantages

There are some important disadvantages of a public limited company, compared to a private limited company. These public limited company disadvantages include:

1 Additional regulatory requirements

To help protect shareholders, the legal and regulatory requirements for a public limited company are more onerous than for private limited companies. For example, additional restrictions include:

• A trading certificate must be obtained from Companies House before the company can trade. There is no such requirement for a private company
• The need to have at least two directors. Only one is required in a private company
• More onerous rules apply concerning loans to directors
• A suitably qualified company secretary must be appointed. This appointment is optional for a private company
• There are higher transparency requirements for company accounts. They must also be produced within six months of the end of the financial year. For private companies, nine months are available.
• AGMs must be held, whereas in a private company decisions can more often be made by resolution
• There are various additional restrictions on the company’s share capital and limits on pre-emption rights and dividends

If the company’s shares are listed, the company will also need to follow the rules of the market. These rules, particularly those to be listed on the London Stock Exchange, are demanding.

Understanding and applying these additional rules will consume time and effort that cannot then be dedicated to growing the business. Appointing staff or advisers – including the required company secretary – will help but come at a cost.

2 Higher levels of transparency required

Limited companies, whether public or private, have more of their details in the public domain, available via Companies House, than other business types. But the required level of transparency is much higher for public companies.

Public limited companies will need to have their accounts audited. They are also generally unable to file abbreviated accounts, whereas smaller private companies can often do so. The fuller form of accounts means a public limited company has to disclose more detailed data about the business and its performance. This information which is then available to anyone who wishes to access it, including competitors.

The accounts of public limited companies are often scrutinised more by analysts. They are more likely to receive media commentary, not all of which may be positive or welcome.

3 Ownership and control issues

With a private limited company, the shareholders will typically be people known to the directors or founders. A private company will often be selective over who to admit as a shareholder. This can help to ensure new shareholders support an existing vision and plans for the business. The use of pre-emption rights can allow existing shareholders to maintain control over the company when a new share issue is undertaken, a shareholder dies or wants to transfer their shares.

With a public limited company, it’s much harder to control who is a shareholder of the company, and who the directors are ultimately accountable to. There is therefore a possibility that the original owners or directors can lose control of the direction of the company. Shareholder disputes may be difficult to manage. The founds may find themselves investing a lot more time managing shareholder expectations.

Institutional shareholders can wield particularly high levels of influence. They will often expect consultation and adoption of particular policies or standards in return for their investment.

4 More vulnerable to takeovers

At worst, a company can become vulnerable to a hostile takeover if a majority of shareholders agree to a bid. With shares being freely transferable, a potential bidder can build up a shareholding in advance of launching a bid attempt.

5 Short-termism

Where a public limited company is listed, there can be added pressure imposed by the market. The company’s share price represents the value of the company as viewed by the market. Investors will usually expect a healthy return. As well as dividends paid from profits, there will be a desire for the share price to increase.

This level of emphasis on the share price can cause the directors to focus almost exclusively on short-term results. They may therefore miss strategic opportunities or threats, thereby not achieving the best for the business in the long-term. In private companies, there is usually less focus on the current share price, even to the extent one is available.

6 Initial financial commitment is higher

The minimum financial commitment is higher for a public limited company than for a private limited company. In order to trade, the plc must start with at least £50,000 of nominal share capital. At least 25% of this must be paid up . That means at least £12,500 must be committed to the business, whereas in a private company a single share of (say) £0.01 could be allotted – and not even paid for on issue!

Associated costs of company formation may also be higher, especially if the company’s requirements are complex. If the company’s shares are to be listed on an exchange, it will typically pay legal and investment professionals to advise and manage the listing process. There will be other costs associated with obtaining a listing.

All companies and LLPs are required to maintain up to date statutory records . Inform Direct is the perfect tool to keep your unlisted public limited company's records up to date .

A previous version of this article was originally published on 25 November 2016.

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Public Limited Company: Definition, Features, Advantages, Disadvantages

A public limited company is a voluntary association of members that are incorporated and, therefore has a separate legal existence and the liability of whose members is limited.

Public limited companies are listed on the stock exchange where it’s share/stocks are traded publicly.

Its main features are;

• The company has separate legal existence apart from its members who compose it.
• Its formation, working and it’s winding up all its activities are strictly governed by rules, laws, and regulations.
• A company must have a minimum of seven members but there is no limit as regards the maximum number.
• The company collects Its capital by the sale of its shares and those who buy the shares are called the members. The amount so collected is called the share capital.
• The shares of a company are freely transferable and that too without the prior consent of other shareholders or subsequent notice to the company.
• The liability of a member of a company is limited to the face value of the shares he owns. Once he has paid the whole of the face value, he has no obligation to contribute anything to pay off the creditors of the company.
• The shareholders of a company do not have the right to participate in the day-to-day management of the business of a company. This ensures the separation of ownership from management. The power of decision making in a company is vested in the Board of Directors, and all policy decisions are taken at the Board level by the majority rule. This ensures the unity of direction in management.

As a company is an independent legal person , its existence is not affected by the death, retirement, or insolvency of any of its shareholders.

Advantages of Public Limited Company

A public limited company is a form of business organization that operates as a separate legal entity from its owners. It is formed and owned by shareholders.

Shares of a public limited company are listed and traded at a stock exchange market freely. Shareholders of a public limited company are limited to potentially lose only the amount they have paid for the shares they own.

So, some advantages of a public limited company are;

Led by Board of Directors

Limited liability, number of members, transferable shares, financial privacy, large capital.

Public limited companies are headed by a board of directors. The composition of the board of directors is set out in the company’s articles of association.

Normally it comprises a minimum number of two members and a maximum of 12.

These are elected from the shareholders by the shareholders during the annual general meeting. They act as the representatives of the shareholders in the management of the company.

Shareholder liability for the losses of the company is limited to their share contribution only. This is what makes it a separate legal entity from its shareholders.

The business can be sued on its own and not involve its shareholders. The company does not belong to any person since one person can own only a part of it.

A public limited company has a minimum number of seven shareholders or members and a limitless number of members. It can have as many shareholders as its share capital can accommodate.

Shares of a public limited company are bought and sold in a stock exchange market. They are freely transferable between its members and people trading in the stock exchange.

A public limited company is not affected by the death of one of its shareholders, but her shares are transferred to the next of kin and the company continues to run its business as usual.

In the case of a director’s death, an election is held to replace the deceased director.

Public limited companies are strictly regulated and are required by law to publish their complete financial statements annually .

This ensures that they reveal their true financial position to their owners and potential investors so that they can determine the true worth of its shares.

Public limited companies enjoy an increased ability to raise capital since they can issue shares to the public through the stock market.

They can also raise additional capital by Issuing debentures and bonds through the same market from the public. Debentures and bonds are unsecured debts Issued to a company on the strength of its integrity and financial performance.

Disadvantages of a Public Limited Company

A Public Limited Company (PLC) means, first, that the firm is parceled out into shares and sold “publicly” on any or the entire globe’s stock exchanges.

Secondly, it means that those who invest in the firm are protected from extreme loss if the company fails.

This is called “limited liability.” This means that if one invests in a firm that fails, only that investment money can be claimed by the firm’s creditors.

More abstractly, “limited” means that only the existing assets of the firm can be seized for the payment of a debt.

So, some disadvantages of a public limited company are;

• High Costs.
• Public Books.
• Greedy Shareholders.
• Slow Decisions.

A Public Limited Company is normally a complex thing to start. The firm banker (or “underwriter”) then offers the initial shares to the public (and keeps a substantial commission).

Often, the costs of setting up a public firm and Initial Public Offering (IPO) can run into hundreds of thousands of dollars.

Public Books

The term “public” here is to be taken literally. Once a firm goes public, the firm is open to public inspection. The financial books and records of the firm are open to anyone, allowing the competition to see precisely how much profit or loss the firm is experiencing.

Greedy Shareholders

Those who buy shares have no particular interest in the firm except in that it makes a quick buck.

Most companies, however, have an interest in laying out a long­term growth plan that takes patience and planning It is not often many shareholders see it this way.

Since the company is now “public,” anyone can buy up shares, and there is no limit as to how many shares one can buy.

Under certain circumstances, hostile investors might buy up a large amount of stock, giving them a strong voice on the board of dimeters.

In this case, a firm that was built up by one group (or poison) can now be taken over by others since the firm has gone public

Going “public” means a certain lack of control by the founders of the firm. In some cases, the firm can be controlled by a board of directors who do not necessarily have the time for hands-on business management.

Therefore, ownership can be separated from control. If this is the case, then those who control the business do not own it and do not see a profit. This is not an incentive (necessarily) to rational management.

Slow Decisions

If the company is public, it must have a board of directors representing the main and most powerful stockholders.

This means, in turn, that major decisions must go through the board, with debates and voting. In reality, this entails that decisions will be slow and often painful. Sometimes, they might not be made at all.

What is the Difference between Private and Public Limited Company?

The main difference between a private and public company is that public company is allowed to raise capital by selling shares on the stock exchange, where private limiteds are not allowed to publicly traded stock.

Even though both private and public limited companies types are registered and incorporated under the same Company Act.

Common differences between a private and public limited company are;

Following are the main distinction between a public company and a private company:-

Minimum number of members

The minimum number of members required to form a private company is 2 , whereas a Public Company requires at least 7 members.

Maximum number of members

The maximum number of members in a Private Company is restricted to 50; there is no restriction of a maximum number of members in a Public Company.

Transferability of shares

There is a complete restriction on the transferability of the shares of a private Company through its Articles of Association, whereas there is no restriction on the transferability of the shares of a public company

4 Issue of Prospectus

A Private Company is prohibited from inviting the public for the subscription of its shares, i.e. a Private Company cannot issue Prospectus, whereas a Public Company is free to invite public for subscription i.e., a Public Company can issue a Prospectus.

Number of Directors

A Private Company may have 2 directors to manage the affairs of the company, whereas a Public. A company must have at least 3 directors.

Consent of the directors

There is no need to give the consent by the directors of a Private Company, whereas the Directors of a Public Company must have a file with the Registrar consent to act as Director of the company.

Qualification shares

The Directors of a Private Company need not sign an undertaking to acquire the qualification shares, whereas the Directors of a Public Company are required to sign an undertaking to acquire the qualification shares of the public Company.

Commencement of Business

A Private Company can commence its business immediately after its incorporation, whereas a Private Company cannot start its business until a Certificate to commencement of business is issued to it.

Shares Warrants

A Private Company cannot issue Share Warrants against its fully paid shares, whereas a Private Company can issue Share Warrants against its fully paid-up shares.

Further issue of shares

A Private Company need not offer the further issue of shares to its existing shareholders, whereas a Public Company has to offer the further issue of shares to its existing shareholders as right shares.

Further issues of shares can only be an offer to the general public with the approval of the existing shareholders in the general meeting of the shareholders only.

Statutory meeting

A Private Company has no obligation to call the Statutory Meeting of the member, whereas Public Company must call its statutory Meeting and file Statutory Report with the Register of Companies.

The quorum in the case of a Private Company is 2 members present personally, whereas in the case of a Public Company 5 members must be present personally to constitute a quorum.

However, the Articles of Association may provide and several members more than the required under the Act.

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Home » Business » Public Limited Company – Advantages and Disadvantages

Public Limited Company – Advantages and Disadvantages

• January 12, 2024

A public limited company’s advantages and disadvantages are numerous. The main advantage is access to more investors, through making their stocks public. Whilst even a layman in the stock exchange can tell this new method to raise capital is beneficial, there are more factors to consider.

Around 4% of UK businesses become public limited companies, due to the advantages and disadvantages we’ll outline below. Real Business has put together this article to ensure that any private company considering making the change has enough understanding to make an informed decision.

Table of Contents

The Advantages and Disadvantages of Public Limited Companies

Public limited company advantages.

The following are the advantages a public limited company structure gives access to:

• Raise Capital – By listing on a main stock market, such as the famous London Stock Exchange, you widen your pool of potential investors by a large margin, which can raise funds. Most investments will be small, but PLCs have been known to attract legal and investment professionals, such as financial institutions. Institutional shareholders have also been known to raise significant capital for the PLC.
• Increased Prestige – By becoming a Public Limited Company, your business structure concerning the stock exchange is held to a higher standard. This is because PLCs are subject to stricter regulatory requirements, as well as more in-depth reporting, by bodies such as the companies house. This signals transparency and integrity. Suppose you’re also successful in raising capital through the stock exchange with these oversights. In that case, you will achieve the image that many public limited companies are associated with – stable, professional, and committed to long-term growth. It’s essentially free publicity.
• Shareholder Liquidity – Both new and existing shareholders can sell their shares easily, unlike with a private company. This increased ability allows private company limited shareholders to take advantage when the share price increases, allowing them to lock in profits by cashing out, and potentially re-entering if it lowers.
• Limited Liability – PLCs are a separate legal entity from its shareholders, creating a dividing line between company debt and the personal finances of investors. Shareholders’ potential losses are relevant only to the share’s worth, and they are in no way affected by the legal or financial difficulties of a PLC in terms of liability.
• Separate Legal Entity – Tying into the earlier point, PLC’s contracts, purchase of property, and such, do not affect the shareholders. The PLC exists independently, even if the company director or owner should change, or the shareholders pass away, the company will continue operation. PLCs are also taxed differently from their shareholders, which can be advantageous in certain situations. This protects shareholders’ wealth and enables long-term relationships.

Public Limited Company Disadvantages

Private companies may consider the following the possible disadvantages of switching to a public limited company:

• Administrative Cost – A PLC conversion mandates detailed procedures, such as requirements related to share price, company directors count, and the installation of a qualified company secretary – all of which come at a cost. They must also provide more strict reporting, having to submit financial statements and other disclosures to ensure transparency regularly.
• Control Loss – Existing investors and shareholders who hold substantial ownership will find that they lose control and influence as the expansion opportunities granted by increased access to shares are realised. Important decisions are dictated by majority rule, rather than the wealthiest individual investors. Activists are also known to be drawn to PLCs, who can often push for changes that are disadvantageous to individual investors.
• Public Scrutiny – A PLC’s financial situation is under surveillance consistently, and investors, analysts and media outlets analyse reports. Since public markets have a great emphasis on short-term results, the pressure can lead PLCs to prioritise this at the expense of long-term investments. Negative news can also cause negative effects on the share price, impacting the company’s valuation and reputation.
• Takeover Possibility – There are several scenarios in which vulnerability could lead to takeover attempts of publicly traded companies. If the shares go too low, then it can attract investment from those who can attempt several techniques to take over. These takeover strategies include appointing friendly board members, pushing for an outright takeover through attractive proposals, or launching tender offers to other shareholders, thereby reducing the amount of resistance through the voting system. This means that part of your struggles during poorer periods of business performance would be to maintain control of the company.

Are the Public Limited Company Advantages and Disadvantages Worth it for your Private Company?

As a growing business, you’ll eventually face choices on business structure and direction.

Large-Scale Capital Needs

Does your company have growth ambitions? A PLC can facilitate this with access to large companies, such as financial institutions. That being said, this may cut you off from securing the same level of funding through loans and venture capital. If your company has modest ambition, perhaps it’s better off staying as a sole trader.

The desire for an increased reputation may change this, however. PLC status comes with associated costs but also gains outside of the contents of your financial reports, such as pre stige and trust. This could give a competitive edge, and attract powerful business partners. But if you’re operating in a niche market, or in a market where reputation is not a factor, PLC holds much fewer advantages for you.

PLCs provide less control than private companies. In larger and smaller private companies, all decisions are made subject to a smaller number of shareholder expectations and your company directors. Outside of time managing shareholder expectations, you have a regular private company’s regulations and reporting requirements. Also, you don’t need to undergo the administration changes.

If this isn’t relevant to your business structure, then PLCs become a more attractive option.

Professional Advice

What do experts say? Professional legal experts can explain the specific regulations, formation procedures and ongoing compliance requirements, and investment professionals and advisors can analyse your company’s financial needs, projections, risk tolerance and opportunities. But ultimately, only you as a business owner can decide if becoming a PLC is right for your business.

Is a PLC right for me?

A public limited company remains business as usual if going public, operationally speaking. But carefully weighing if the advantages outweigh the drawbacks before making this leap is vital. PLC status impacts finances, governance, obligations and control in exchange for investment capacity. Reviewing this tradeoff holistically is key.

The rest of this guide examines major considerations around becoming a public limited company in the UK. Both upside potential and downside risks come with this choice.

What are the Minimum Requirements to Become a PLC?

Now that we’ve looked at the advantages/disadvantages of a Public Limited Company (PLC) you should know whether you qualify to make the transition.

The requirements to set up a public limited company are:

• Share Capital – A PLC must have a minimum share capital requirement of £50,000, with at least a quarter of it being paid up.
• Company Director – You need at least two directors.
• A qualified company secretary – A PLC must appoint a qualified company secretary.
• Registered Office – You need a registered office address within the UK where official documents will be served.
• Trading Certificate – If you plan to immediately enter trading as a PLC, you will require a trading certificate from companies house.

While PLCs can be large corporations, even small and mid-sized private companies can make this shift by meeting the above basics.

How do I change to a Public Limited Company?

There are several things you must do to make the transition once the requirements for a public company have been realised:

• Choose a Company Name – You must choose a company name that ends in PLC or Public Company Limited.
• Prepare Key Documents – You will need to draft both your memorandum of association, which states the company name, objectives and initial share capital, and articles of association, which are a collection of rules governing how the company will run.
• Companies House Register Signing – You must apply with companies house, submitting documents as necessary.
• Registration Fees – You will pay a fee.
• Obtain a Trading Certificate – This is the point at which you’ll apply for a trading certificate if you need one.

The PLC Transition Process

While PLC status has significant advantages for growth, the transition process itself is substantial. Understanding each phase helps determine if and when pursuing an initial public offering makes sense.

Private to Public: Key Transition Points

Each successive phase brings increased obligations — it’s the price of liquidity and fundraising potential. So thorough readiness is crucial.

The pathway can work with disciplined execution, realistic expectations and expert guidance. But a public crash equally exposes unprepared companies.

Key Reasons PLC Transitions Fail

Despite the interest, many private companies find a full public listing ultimately not viable. Common pitfalls include:

Avoiding these missteps requires pragmatic projections and execution discipline even amid hype. The public markets allow no leniency for underprepared organisations looking purely to cash in.

Transitioning a private company into a listed public entity enables tremendous fundraising capacity but demands increased financial and operational obligations few leadership teams fully anticipate. Despite the list of public limited company advantages and disadvantages, there are numerous examples of success stories, such as the rapid global growth of some UK public technology innovators like Wise, THG and Deliveroo.

Ultimately the optimal choice of remaining private or pursuing a public listing comes down to honestly weighing specific ambitions, growth requirements, risks and leadership preferences against viable options. Getting aligned on what problems an IPO solves is the right first step.

Public Limited Company – FAQs

What is the difference between a public limited company and a private limited company.

A private limited company’s shares are not publicly traded and are held by a smaller group, such as founders, family, or perhaps banks and other financial institutions. There is no need to submit annual accounts audited with the same details, nor do your shareholders benefit from limited liability protection. Nonetheless, if you want further detail, Real Business has put together an article on the advantages and disadvantages of a private limited company formation. 

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Overview of Public Limited Company (PLC)

Public limited companies have all the rights enjoyed by an entity that is a corporation with limited liability and is an ideal option for medium and small-sized enterprises that want to get equity capital from the general public.

Similar to other companies as well, like other companies, a Public Limited Company is also registered according to the regulations and rules in the Companies Act, 2013. Public Companies enjoy the advantage of having limited liability for their members.

It also has the option of selling its shares to raise the capital of the business. It is incorporated with a minimum of directors, and it has stricter rules and regulations in comparison to a Private Ltd.

In this article, we will be going to discuss more briefly about Public Limited Companies and their various characteristics. So, without any further ado, let’s begin with it.

What is a Public Limited Company (PLC)?

A Public Limited Company (PLC) is a type of business entity that is legally permitted to offer its shares for sale to the general public. In a PLC, ownership is divided among shareholders, who purchase shares of the company’s stock through public offerings on stock exchanges or through other means of public trading platforms. PLCs are commonly larger and more established companies, often with significant capital requirements and a desire to expand operations or raise funds from the public.

However, a PLCs stock or firm share is introduced to the general public & could be bought or acknowledged by any person, either personally during the cycle of the IPO   or through trading in the stock market. PLC is even recognized as a publicly held firm.

How does a Public Limited Company Work?

Public limited companies (PLCs) business are very normally utilized in India, United Kingdoms & in an amount of Commonwealth countries. Eventually, this label is utilized with indifference to the Inc. or Ltd. These are such labels that are being utilized in the US & different parts of countries.

In the countries quoted above, the PLC label is necessary & it is utilized to notify investors or any person who aspires to buy and sell with such a firm that the company is publicly available & most few the time it’s very huge.

However, PLC in India can either be registered or unregistered on the share market. It’s completely onto them, whether they want to be registered on not.

Besides their listing decision on the stock market, they are ordered to showcase their financial year reports & illustrate their economic condition to enrich investors’ & stakeholders’ beliefs & even to gain public trust.

The lifespan of a shareholder in a publicly-held company doesn’t impact how long it will continue to be a firm. These businesses can be used to raise capital but also have increased regulation.

Characteristics of a Public Limited Company (PLC)

Separate legal entity

A Public Company is a lawful business entity that has a separate identity from its members/shareholders.

Easy Transferability

A shareholder of a public limited company can easily transfer its shares to the board of the shareholders/directors is limited to the extent of the shares owned by them. In the event of any losses or debts, the shareholders are not personally liable.

Paid-up Capital

For a public company to begin its operations, the minimum  paid up capital  required is Rs 5,00,000. This is the amendment to the Companies Act 2013.

The word “LTD”, which will be added to the end of any public company’s name, will be included in the name.

The minimum number of  Board Of Directors  is 3, maximum of 12. They are elected by shareholders at the Annual General Meeting.

Only the  Director ID Number  (DIN), issued by the Ministry of Corporate Affairs, must they possess.

A prospectus can be issued to invite the public to subscribe to its shares by registering a public limited company.

A prospectus is a statement that contains detailed information about the company as well as the number of shares requested by the company for an  IPO  or subsequent listing.

Borrowing capacity

Public companies have the advantage of being able to borrow money from many sources. Public companies can issue debts (secured and unsecured) to raise money. It can also issue preference or  equity shares  to the public. The company can receive financial aid and loans from banks and other financial institutions.

Number of members

There must be 7 members in a Public company, there is no upper or lower limit to this number.

Voluntary Association

It’s easy to purchase shares in a public company, and it’s just as easy to leave the public company.

Minimum Subscription

The minimum amount that must be received for subscriptions of shares is 90 percent of shares in the public company. The company cannot continue to operate if they are unable to pay the 90 percent amount.

Minimum subscribers

The 7 members of the Public company are the subscribers of the Memorandum of Association of Public Company.

Certificate of Commencement

This is a vital document that must be obtained by the public company before starting a business. The  Certificate Of Incorporation  is the last document needed for a private company. 

For public companies, both the Certificate of Incorporation and Certificate of Commencement is required.

Memorandum of Association

The  MOA , which is an important document for the formation of a public company, is essential. After completing the  Articles of Association , a private company can begin its business. For a public company, the Memorandum must be submitted to MCA along with the company’s registration.

Section 2(56), Companies Act 2013, defines Memorandum. It outlines the main goals of the company, that is, the main business the company will be involved in.

Private Limited Company vs Public Limited Company

Is limited company a public or private.

Public limited companies are open to the public. This means anyone can purchase shares in them. Private limited companies (Ltd), however,  are not traded or registered on the share market.

Many public limited companies were founded as private limited businesses, which then became public after they grew. To be eligible for publication, a public limited company must have a share capital of at least Rs. 5,00,000.

Most companies will need to achieve this threshold by completing a period of business growth. To go public, the company will need 75% shareholder votes. 

Advantages of Public Limited Company

• Share sales can be used to raise capital for the company.
• This capital can be used to fund expansion or new opportunities
• You can also use capital to pay off your debt
• Increased brand awareness through publicity
• The stock market listing can improve a company’s prestige and reputation
• Public records may make it easier for you to find business partners
• A brand’s transparency can help customers perceive it better

Disadvantages of Public Limited Company

• A PLC requires two directors, while an Ltd needs only one.
• Public companies have a shorter deadline for tax payments to respective authorities of the country. 
• A company secretary for a PLC must have a high level of qualifications, unlike the company secretaries of Ltd.
• Anybody can become a shareholder, and this can cause a company’s vision to be diluted.
• More power is distributed to the less vulnerable shareholders, the more vulnerable they are.
• Public limited companies must hold an annual general assembly

How to Invest in Public Limited Company?

These are the steps to invest in the public limited company are mentioned below:

Research : Before investing in any PLC, it’s crucial to conduct thorough research. This includes studying the company’s financial reports, understanding its business model, evaluating its industry position, and assessing its future prospects. Utilize financial news websites, annual reports, and analyst recommendations to gather information.

Understand the Market : Gain a comprehensive understanding of the stock market and how it operates. Learn about different types of investments such as stocks, bonds, mutual funds, and exchange-traded funds (ETFs). Determine your investment goals, risk tolerance, and time horizon.

Selecting a PLC : Once you’ve conducted thorough research, carefully select the PLC you want to invest in. Consider factors such as the company’s management team, competitive advantage, growth potential, and dividend history (if applicable). Look for companies with strong fundamentals and a track record of consistent performance.

Open a Brokerage Account : To buy and sell shares of a PLC, you’ll need to open a brokerage account. Choose a reputable brokerage firm that offers competitive commissions, a user-friendly trading platform, and access to research tools and educational resources.

Place an Order : Once your brokerage account is set up, you can place an order to buy shares of the PLC. Decide whether you want to buy the shares at the current market price (market order) or specify a certain price at which you’re willing to buy (limit order).

Monitor Your Investment : After purchasing shares of the PLC, monitor your investment regularly. Keep track of the company’s performance, industry trends, and any news or events that may impact its stock price. Consider setting up alerts or notifications to stay informed.

Diversify Your Portfolio : Avoid putting all your investment capital into a single PLC. Diversify your portfolio across different companies, industries, and asset classes to reduce risk. This can help mitigate losses if one investment underperforms.

Long-Term Perspective : Investing in PLCs should typically be done with a long-term perspective. Avoid making impulsive decisions based on short-term market fluctuations. Instead, focus on the company’s fundamentals and its ability to generate sustainable growth over time.

A public company is an attractive option for businesses with large amounts of capital to invest. They are good for entrepreneurs who intend to run large-scale activities. An investor in a public limited company is not individually liable for any losses or debts of the firm that exceed their investment.  Entrepreneurs in a PLC can increase the capital of the company by inviting the public to subscribe to shares.  The capital is invested in a variety of securities, which helps to reduce overall risk. It eventually gives the company growth opportunities.

Our professionals at OnDemand International have an in-depth understanding of Public Limited Companies and are available to assist you at every stage.

Limited liability companies have distinct legal existence, limited liabilities, flexible taxation, and straightforward operations.

Increasing shareholder value by making as much money as possible has traditionally been the core objective of practically every publicly traded corporation.

It gives creditability to the company in the sights of financial organizations, distributors, and likely customers.

Yes, a sole proprietorship can be modified into PLC after ensuing the companies act, 2013 protocols.

Yes, any outside residents or an NRI can be a director or stakeholders of a PLC.

• A public limited corporation is one whose shares are sold openly and is registered on a reputable share market. Private limited corporations are neither registered on a share market nor traded openly.
• Contrary to private limited corporations, which must consist of not less than two members, public limited businesses must consist of not less than seven members.
• A private limited corporation must have at least one lakh in paid-up capital, while a public limited firm must have five lakhs.

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A Complete Guide to Public Limited Companies (Including Examples)

Starting a business can be a daunting experience. There seems to be an endless list of factors to consider, such as whether to set up as a public limited company.

That is why we felt it necessary to compile all our expert knowledge and provide you with everything you need to know about public limited companies. Thus, we have written this complete guide to support those considering choosing a public limited company and those simply interested in gathering extra information on the topic.

We hope it is useful and helps you make an informed decision about your company. As experts in online company formations, our services can help you. So please don’t hesitate to get in touch with our team to find out more about how we can assist you in your company formation .

What is a Public Limited Company?

First of all, to make an informed decision about the set-up of your company, it’s essential to understand your options and what each of them are. For example, you may have heard of a public limited company referred to as such, or perhaps as PLC as it is sometimes known.

This type of company is a structure choice available for businesses in the UK. It is a popular option for those looking for something other than a sole trader or partnership structure. For example, unlike these two company structures, a public limited company is an entirely separate entity to its owners. Which, in itself, brings an abundance of benefits that we will explore in this article.

A public limited company is a business that shareholders own and is managed by directors. The shareholders can be anyone, as the option to purchase and hold shares is open to the public.

How Do Public Limited Companies Differ from Private Limited Companies?

Private and public limited companies can sometimes get confused due to similarities in their names. However, the two company structures are entirely different, offering a completely divergent set of advantages and disadvantages.

The key difference is in their names. A private limited company is privately owned and held by its members. In contrast, a public limited company is owned by anyone who has purchased shares within the company. These shares must be made public on the stock market, so the public can make an informed decision on whether they want to purchase them or not. It is illegal for private limited companies to sell shares publicly through trading on the stock market, and instead, they must transfer or sell their shares privately.

Another difference between the two company structures is public limited companies require at least one qualified secretary and two additional directors. Private limited companies do not require a secretary. Still, they do need at least one individual over the age of 16 acting as a director, who can also be a sole shareholder.

Finally, a public limited company must have a minimum of £50,000 in share capital, whereas private limited companies do not require a minimum share capital.

We understand this can get a little confusing. If you need help deciding which is the best choice for you and your company, we offer fantastic company formation services here at Company Registrations Online.

Examples of Public Limited Companies in the UK

As of January 2022, there were 2,010 public limited companies in the UK – a number declining on average since 2008. Here are some examples of some well-known public limited companies you may recognise:

• AstraZeneca Plc
• Barclays Plc
• Cineworld Group Plc
• easyJet Plc
• J Sainsbury Plc
• Marks & Spencer Group Plc
• Royal Mail Plc
• Vodafone Group Plc

One of the first things you may notice about this list is that they all include the designation ‘Plc’ after their brand name, which indicates that a company is a public limited company. So, if you’re interested, you can be part of these hugely profitable companies just by purchasing a share of the business.

Advantages of Public Limited Companies

Whilst public limited companies aren’t the right choice for every business, they indeed come with some fantastic advantages – let’s take a look.

• Raised capital. The company can quickly raise capital through the sale of company shares. This money can be invested straight back into the business and used in various ways. For example, to assist in growth, help launch new ventures, research and development, or pay off debt.
• Brand awareness. You are putting your business out there and immediately increasing your brand awareness by choosing to go public. A public limited company generates interest from stock investors, which has a knock-on effect and increases the company’s awareness for potential employees, partners, suppliers, customers, or clients.
• Improve customer perception. When labelled as a public limited company, your business gains a sense of transparency. This is fantastic for improving your business’ customer perception, as it shows there is nothing to hide.
• Reduced risk. As equity is spread across a broad base of shareholders, the risks are immediately reduced.
• Easier to develop network links. Those investing in your company will want to see it succeed to gain a more significant profit themselves. Because of this, you will have a broader scope of people helping your business to grow and be successful, expanding your possible network and business links.
• Easier to access financial support. Keeping up a listing on the stock exchange is a high demand job that requires a lot of attention and financial support. Because of that, banks view public limited companies as safe bets and often accept financial support requests and provide them with better interest rates.

Disadvantages of Public Limited Companies

Whilst the advantages of public limited companies may seem attractive, it’s crucial to look at the whole picture and read into the disadvantages of this company structure too – let’s take a look:

• Two directors are needed. Unlike private limited companies, public limited companies require two different directors. This could be an issue if the two director’s visions do not line up or personal issues arise between them.
• Loss of control. A public limited company gives the public the option to purchase shares and essentially own a part of the company, giving them a certain degree of control. Thus, if over 50% of the shares are sold, members could take over the business altogether, leaving the directors responsible for actions they cannot control.
• Similarly to the previous point, a public limited company is vulnerable if another business buys up shares. They can force decisions and ultimately take over the business.
• Negative attention from the stock market. Going public has a long list of benefits, as discussed; however, if the company gets any negative press regarding its share price, it could seriously damage its reputation.
• Disunited company vision. As shareholders can be anybody, the original company vision could become lost. Therefore, everyone must share the same goals to have a unified and successful company.
• Increased regulations. Unlike a private limited company, there are many regulations and requirements that a public limited company must legally follow. We will take a look at these in further detail below.

What Are the Legal Requirements of a Public Limited Company?

In addition to the legal requirement of one qualified secretary and two different directors, there are many regulations that public limited companies must follow. Annually, they must have their accounts audited and filed with Companies House, send a report of any changes to directors and shareholders (also to Companies House), and publicly publish current profits, their financial position, and tax responsibilities. They must also hold an annual meeting, referred to in the industry as an AGM, where accounts and dividends are discussed with shareholders. Furthermore, directors must complete a Self-Assessment Tax Return annually to comply with the public limited company regulations. Finally, they must inform HMRC of any taxable profits within six months of the end of the financial year. Following this, Corporation Tax that is owed must be paid annually.

Can a Public Limited Company Become a Private Limited Company?

In short, yes. If you decide that you no longer wish to trade as a public limited company, you have the freedom to go private at any point. This decision is usually made if the directors feel like they would like to take back some control and that, unfortunately, the disadvantages now outweigh the advantages.

Luckily for you, if you have made this decision, Company Registrations Online are here for you. We are experts in our field, so if you’re looking to form a company in the UK or switch from public to private, please take advantage of our services.

How to Set Up a Public Limited Company

If you feel a public limited company is the most suitable route to go down, you must understand how to set up your company the right way. You will first need to gather some information and have the qualified secretary and two directors available and ready with the proper documentation.

Firstly, you must choose a unique company name that ends in Plc. You will need to provide this upon registration along with your registered office address, personal information from your secretary and two directors, and details of the initial shareholders.

Once you have gathered this information, you must prepare your memorandum and articles of association. Following this, you are now ready to register your company online. We will explain how the team here at Company Registrations Online can help below.

When your registration is complete and before you are legally allowed to start trading, you need to obtain a trading certificate; the form for this can be found on the Government’s website.

The final step in setting up your public limited company is to complete your initial public offering, often referred to as an IPO. A financial audit will be conducted to ensure that you are eligible, followed by completing a statement and application that will get passed onto your chosen stock exchange.

How Can CRO Help?

We have almost 30 years of experience in the company registration industry, so we are more than equipped to provide professional advice when registering your public limited company. Our Company Registration Packages are a fantastic place to begin, as they include everything you need to get your company up and running the right way.

The Al- Inclusive Company Formation Packages can include any or all of our add-on services and allow you to select the individual services that work for you and your business. For example, we offer:

• Bespoke Articles of Association approved by The Association of Company Registration Agents
• 12 months Managed Company Secretarial Service
• Fully completed Statutory Registers prepared under the Companies Act with completed Share Certificates
• 12 months Registered Office address
• VAT registration
• PAYE registration
• And so much more

To see the complete list of our services, head to our Company Registration Packages page . On here, you can view all services available and begin selecting those you would benefit from to form your bespoke package.

We hope that our complete guide to public limited companies has been helpful, and you now have a better understanding of this company structure. If you require any more information or have any questions regarding our company formation services , please don’t hesitate to get in touch , and a member of our team will be more than happy to help you out.

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Legal guide to public limited companies.

It’s safe to say that most companies start out as private limited companies, potentially shifting up a gear at a later date to be listed on the London Stock Exchange and become a public limited company. But what are the risks involved? And the corporate governance regulations you need to comply with? This article, in our series on the different kinds of company in the UK, looks at the characteristics that make up a public limited company and how that compares to a private company.

Who controls a public limited company?

What is a public limited company.

A public limited company is a limited liability company, formed in a similar way to a  private limited company under the Companies Act 2006 (‘the Act’), that has chosen to raise capital by offering its shares to the general public.

Its liability is limited by way of shares, which means that under the Act, the liability of a company’s members (the people that own the company) is limited for each member to the amount as yet unpaid on the shares held by that member.

If a company needs to generate large amounts of capital for use in its business, one way to achieve this is by forming a PLC. A start-up business is unlikely however to begin life as a PLC ­– it’s more likely to form a private limited company first owned by a small number of founders and investors or funders, and later convert to a PLC once its business has been established and has a track record that will attract public investors. A large percentage of the shares of PLCs are often owned by investment and pension funds, known as ‘institutional investors’.

How is a public limited company formed?

A PLC is formed in a similar way to a private limited company. They both have constitutional documents under the Act (a memorandum and  articles of association ) which have to be filed at Companies House and govern the way the company is run.

There are slightly different requirements for a public company than a private company, for example, a public company must have at least two directors and a company secretary, whereas a private limited company is only required to have one natural director and there is no requirement to have a company secretary.

Another similarity to a private company limited by shares, is that the shareholders have limited liability for the debts of the business.

Different types of public limited company

You can recognise a PLC from its name because, under the Act, it is compulsory to include the ‘p.l.c.’ or ‘Public Limited Company’ denomination after the public company’s name. Most of the UK’s largest and most well-known companies are run as PLCs.

Public limited companies in the UK can be listed , quoted , traded , and unquoted traded .

• A listed company is a public company that has a class of its securities admitted to trading on a UK regulated market that have been officially listed with either a premium listing or standard listing to the Financial Conduct Authority's (‘FCA’) Official List (as required by the Financial Services and Markets Act 2000).
• A quoted company is described in the Act as a UK incorporated public company with equity shares that are: (a) listed in the FCA’s Official List and are admitted to trading on a UK regulated market for listed securities, (b) officially listed in the EEA, or (c) admitted to dealing on the New York Stock Exchange or the NASDAQ.
• A traded company is defined in several ways under the Act. For example, under Part 13 of the Act it is defined as a UK incorporated company with its shares admitted to trading by or on behalf of the company on either a UK regulated market or an EU regulated market provided those shares have voting rights at general meetings of the company’s shareholders. Under Part 15 of the Act however, a traded company is defined as a UK incorporated company with transferable securities admitted to trading on a UK regulated market. Parts 9 and 24 also have variations on the definition of what a traded company is.
• An unquoted traded company under the Act is a Part 13 traded company that is not a quoted company, so a UK incorporated company with its unlisted voting shares admitted to trading on either a UK regulated market or an EU regulated market by or on behalf of the company.

The UK’s largest publicly held companies listed on the London Stock Exchange are classified into an index known as the Financial Times Stock Exchange 100 or the ‘FTSE’.

However, as mentioned above, not all PLCs are listed on a stock exchange, even though they are theoretically entitled to do so. Having securities admitted to trading on a regulated market means a lot of additional regulatory and corporate governance compliance for a company as well as compliance with industry guidelines.

What are the characteristics of a public limited company?

PLCs are more highly regulated than private limited companies, particularly PLCs that are listed, traded, or quoted companies. One of the objectives of the regulators monitoring the various stock markets is to ensure that the markets are working efficiently and that investment opportunities are being provided to investors and access to capital is being provided to issuers. There are several legal and regulatory frameworks through which they aim to achieve this goal as well as through widely accepted industry standards.

These are the some of the key characteristics of a PLC:

• Its name will end with the designation ‘P.L.C.’ or ‘Public Limited Company’.
• It must have issued  share capital  of at least £50,000 (or the proscribed Euro equivalent). At least 25% of the nominal value of its shares and the whole of any share premium must be paid up on registration.
• A public company (that has not been re-registered as a public company) must not do business or exercise any borrowing powers unless the Registrar of Companies has issued it with a certificate in accordance with the Act confirming that it has the minimum allotted share capital (a ‘trading certificate’). It is an offence to trade without a trading certificate and the directors of the company could be fined.
• An auditor or auditors must be appointed for each financial year of the company, unless the directors reasonably resolve otherwise on the grounds that audited accounts are unlikely to be required. The Act contains specific rules for companies with and without an audit committee.
• It will have at least two directors (who can also be shareholders).
• It must have at least one company secretary who appears to the directors of the company to have the knowledge and experience needed to carry out the functions of the company secretary and has the relevant qualifications to undertake the role.
• A PLC is obliged to invite all its shareholders to an annual general meeting (‘AGM’) at which the company’s accounts are laid before the company, and at which the company can declare dividends. Often, other decisions of interest to shareholders are discussed at the AGM, such as the appointment of directors and their remuneration packages. An AGM must be held within six months following the end of the company’s financial year.
• PLCs can raise capital for business activities through the sale of shares to the public and can gain publicity for the investment through the process of listing shares for sale on an exchange.
• Usually for years that are not the first year, public company accounts must be filed within 6 months from the end of a company’s financial year (the limit is 9 months for a private company). Public companies must lay copies of their annual accounts and reports before the company in a general meeting. Accounts for quoted companies must also include a separate corporate governance statement required by the Disclosure Guidance and Transparency Rules, which are contained in The Disclosure Guidance and Transparency Rules FCA sourcebook.

What are the advantages of a public limited company?

The biggest advantage for any PLC is the opportunity it must access new investors and exchanges where it can raise capital by selling its shares to the public.  

Another advantage is that a PLC can offer investors a certain amount of liquidity in that investors can sell their shares fairly quickly (particularly if the shares are trading on a stock exchange). If a PLC is planning to expand its business, it can issue shares to the public to fund activities such as:

• Buying property
• Paying off its debts
• Starting a new project
• Engaging in R&D
• Creating a new line of business

Being visible on a stock exchange brings a PLC additional credibility, and it is good publicity in terms of attracting potential investors like mutual funds, hedge funds and traders. PLCs are often thought of as being established companies with a more reliable investment profile. Indications as to the value of a company’s shares are also available to investors as the company’s share prices will be published and can be monitored regularly by prospective or existing shareholders. The more stringent financial requirements imposed on it makes it also more attractive as a candidate for bank loans, and it can find it easier to raise corporate debt.

What are the disadvantages of a public limited company?

Some disadvantages of becoming a PLC are that public companies (particularly listed, quoted, or traded companies) are more highly regulated. They must hold an AGM, and their accounts must be detailed, transparent and available to be inspected by the public.

They can be expensive and complex to set up or to convert a private limited company to a PLC, and you may need to engage  specialist corporate lawyers  and bankers to help you achieve this.

With an increased number of investors comes an increased number of shareholders in whose best interests the company (and its directors) has to act and to be accountable to. Under the Act, there are also restrictions placed on loans to directors (such as the requirement for approval from the company’s members), as well as on the issue of dividends and share capital, and the ability of a company to buy or redeem its own shares out of capital or reduce its share capital . There are also restrictions on financial assistance for the purchase of its shares.

If a PLC is listed on a stock exchange , there will be further reporting, corporate governance and disclosure requirements placed on it, so that potential buyers can understand the risks of their investment.

The company’s performance, business affairs and general actions will be seen and analysed by the financial markets which can affect the value placed by investors on the company and its shares. Poor performing companies can become the target of takeover attempts in which companies or individuals seek to acquire a majority shareholding of the PLC and assume control of it.

Another disadvantage of being a PLC is that the financial position of the company and how it is performing is disclosed not just to shareholders but to members of the public and to competitors. This brings with it the potential for negative press, particularly if the company is seeing a downturn in its profits.

Some AGMs have been disrupted by campaigners who object to the company’s business activities. In recent years, the UK has seen a trend in shareholder activism which can have big implications on the processes and policies the company’s directors put in place when running the company and ultimately result in changes to those policies.

Shareholders in PLCs expect to achieve a reasonable rate of return, and this can lead to problems where companies focus on the short term rather than longer term objectives, like growth and research and development.

Issues of control can also be a problem for a PLC. When a company is small, with just a few investors and directors, it’s relatively easy to do business, and shares can be issued to friends or colleagues who share the founders’ aims and objectives for the business. However, with a PLC, you can’t control who owns shares, and there’s always a danger that the original purpose of the company becomes diluted because of the influence on decision-making brought by large investors, as well as the founders’ original shareholdings. Large institutional investors can come to have a significant impact on the decision-making of the company, exercising their influence by bringing pressure on management, and requiring that they are granted preferential rights or vetos.

In terms of regulation, the UK Takeover Code applies to any public company registered in the UK, the Channel Islands, or the Isle of Man. It also applies in part to some companies incorporated in the EEA which are listed in the UK. The Takeover Code increases the complexity of selling or acquiring a public company, particularly if the company has a vast number of shareholders. If a PLC is listed on a stock exchange, there will be further listing and disclosure requirements placed on it, so that potential buyers can understand the risks of their investment.

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Liability of shareholders and directors of a public limited company

In a PLC, just like a private limited company, shareholders’ liability is limited to the capital they have originally invested in the business by virtue of the shares they own. If they have not fully paid for their shares, they can be called upon to do so.

Company directors run the management of a company and have a range of  duties and responsibilities  described in company legislation (including the Act) and through common law decisions of courts.

These are largely the same whether the company is private or a PLC, for example their duty to promote the success of the company. However, the directors of a PLC have more reporting requirements to the company’s shareholders, particularly if the company is listed, quoted, or traded.

Company directors must, among other things:

• Act in accordance with the decisions made by the company’s shareholders, and within the powers given to them in the company’s constitution.
• Act independently, and in line with their contracts of engagement with the company.
• Act in the best interests of the company and avoid conflict with their own interests. In a PLC, any independent directors’ authorisation of the conflict can only be given if such authorisation is allowed by the company's articles of association. Personal interests of the directors in any company transactions must be disclosed.
• Directors of public companies must avoid situations where they, or a family member, might receive a personal benefit from the actions of the company, unless this has been sanctioned by the company’s members in accordance with the company’s constitutional documents.
• Keep proper records and meet filing requirements at Companies House and HMRC.
• Directors of public companies who are listed on the stock exchange must prepare a remuneration report that discloses the pay and employment policies of senior and key management.

What is the public limited company registration process?

The initial registration process for a PLC at Companies House is similar to that of a  private limited company . For unquoted and non-traded public companies at least one shareholder is required, and you will need to file a memorandum and articles of association.

Here is some of the key information you will need to register a PLC:

• Company name that is not similar to another on record, and that meets certain other requirements, and that ends in ‘P.L.C.’ or Public Limited Company.
• Registered office address.
• At least two directors (name, service and residential address, date of birth, nationality, occupation, other directorships, former name, and any shareholdings).
• Appropriately qualified company secretary.
• A minimum amount of share capital (£50,000).
• Certain security information for directors and shareholder(s).
• Shareholder(s), and number of shares issued, including their names, addresses, number of shares issued.

A PLC is required to complete a second stage in its registration, where it files a ‘trading certificate’ to Companies House in which it declares that it has raised its initial share capital. It cannot trade before this trading certificate is issued.

The company’s certificate of incorporation will state that it is a public company.

Public limited company vs private limited company: what’s the difference?

The Act states that a company is a “private company” if it is not a public company. Here are some of the principal differences between PLCs and private limited companies:

How are public limited companies different from partnerships?

A partnership is a form of business organisation in which two or more individuals (or companies) are jointly responsible for the running of a business. Unless their liability is limited, they are jointly responsible for all losses of the business. Neither the directors nor the shareholders of a PLC are responsible for the losses of the business beyond their shareholdings.

Partners receive and pay taxes on their share of the profits of the business. A PLC pays corporation tax on the profits of the business, and when these profits are paid to shareholders in the form of dividends, the shareholders can also pay tax on those dividends.

Setting up a partnership can be more flexible and therefore less administrative than setting up a company. The partners must draw up a partnership deed, decide a name, choose a nominated partner, and notify the tax authorities.

A traditional partnership is not a legal entity in its own right, and in order to employ staff and own property, all partners must agree and create a decision-making structure to this effect.

How are public limited companies different from joint stock companies?

PLCs can have an unlimited number of shareholders and issue shares to members of the public. The liability of the shareholders is limited, and they are not responsible for the losses of the company, beyond the amount they have paid for their shares.

A joint stock company is a bit like a cross between a company and a partnership. The company can issue and sell shares, but shareholders are responsible for all of the company’s debts, unlike the shareholders of a PLC. In the UK, joint stock companies are known as unlimited companies.

A PLC cannot be a joint stock company.

The board of directors of a PLC controls its day-to-day activities. The shareholders also have a degree of control over the way the company itself is managed and run. This is described in the articles of association and reflected in the extent to which resolutions are passed by shareholders. Shareholders who own or control large numbers of shares may influence the running of the company directly through exercising their rights in the articles of association and at law by passing or vetoing resolutions. They may also indirectly influence, by applying pressure on the directors in an AGM or otherwise, and by the influence they have in the choice of directors in the first place.

With greater requirements for public companies regarding transparency and disclosure to shareholders, there has been an increased focus in the UK on shareholder rights and opinions, which has been welcomed by some as a means of holding public companies accountable to the market and their shareholders. What is clear is that this continues to be an industry objective and so public companies need to make sure that they are responsive to this growing trend.

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Guide to public limited companies (PLCs)

Public limited companies account for 4% of limited businesses in the UK . As SMEs expand and mature, the decision to transition from a private to a public limited company is often made to gain access to extra capital, which comes from the ability to sell shares to the public via a stock exchange such as the London Stock Exchange.

If you run an established organisation and are thinking about going public, it’s vital to clue yourself up on the nuances of publicly listed businesses. Join us as we explore everything you need to know about public limited companies, including their characteristics, advantages and disadvantages, setting one up and your initial public offering (IPO), and ownership. 

What is a public limited company?

A public limited company (PLC) is a business that is legally allowed to sell its shares to the public. Similar to a private limited company (LTD) , the members of a PLC have limited liability – they are not responsible for the company’s debts unless they have given personal guarantees on any business loans. Each individual’s liability is limited to the value of the shares they hold.

The features of a public limited company

Let’s explore some more of the key characteristics of PLCs:

• PLCs can sell shares to the public via a stock exchange;
• This type of organisation collects share capital through the sale of shares to members (the shareholders of a company);
• The company must have issued share capital of at least £50,000 and sold 25% of the value of its shares prior to registration;
• Like LTDs, members of PLCs have limited liability for the company’s debts (they are only responsible for the value of their shares or any personal guarantees made against loans);
• PLCs are viewed as distinct legal entities that are separate from their members;
• They must have at least two directors (compared to just one for LTDs);
• PLCs need at least two shareholders to register;
• A PLC must have a company secretary with an ICSA qualification.

Public limited company examples

There are around 100,000 different PLCs currently operating in the UK. Some of the most well-known and profitable examples include:

• AstraZeneca Plc
• Barclays Plc
• Cineworld Group Plc
• easyJet Plc
• GlaxoSmithKline Plc
• J Sainsbury Plc
• Marks & Spencer Group Plc
• Rolls-Royce Holdings Plc
• Royal Mail Plc
• Vodafone Group Plc

You’ll notice that all of these organisations have the designation ‘Plc’ after their trading names. These three letters signal that a company displays all of the characteristics we discussed above, including limited liability and the ability to sell shares to the public.

Who can buy shares in a public limited company?

Once shares in a PLC have been quoted on a stock exchange, anyone is able to buy them. This is one of the critical downsides of publicly listed firms as it can result in a loss of control over the company (we’ll look at this more closely below).

Advantages and disadvantages of public limited companies

Now that you’ve got the key elements of PLCs under your belt, it’s time to delve a little deeper into the pros and cons of going public rather than remaining as an LTD. There are plenty of advantages to registering as a publicly listed firm, including:

• Raising investment – the share capital brought in through the sale of shares provides a PLC with a source of income that can then be invested into the growth of the company. The additional funds could be used to launch new products, enter new markets, or increase spending on research and development.
• Reduced risk – Whilst other forms of investment may require you to give up large amounts of equity to individual investors; this is spread across a greater number of people with the sale of shares. A broader base of shareholders reduces the risk involved.
• Developing new networks and business links – those who invest in your company will naturally want it to succeed to increase the value of their shares and the dividends they receive each year. As a result, investors are incentivised to help you expand your business network and develop links with other firms that will support your growth.
• Easier access to loans and other forms of finance – banks view listed PLCs as a safer bet than LTDs from a credit perspective due to the demands of keeping up a listing on a stock exchange. With this in mind, publicly listed organisations usually find it easier to get loans than their private counterparts and can negotiate more favourable interest rates and repayment terms.
• Brand awareness and prestige – listing a company on a stock exchange generates attention from investors, increasing awareness of your brand. This often has the knock-on effect of making your brand appear more prestigious to customers, suppliers, and even employees. PLCs often see an uplift in sales and staff retention once they start selling shares.

Whilst all of these factors may make the transition to PLC status seem like an attractive proposition, it is not without its downsides. Compared to private limited companies, PLCs have the following disadvantages:

• Increased regulation and requirements – in addition to requiring two directors and a qualified company secretary, a number of other regulations apply to PLCs that aren’t an issue for private limited firms. We’ll explore these in greater detail in the dedicated section below, but they include points such as the requirement to have company accounts audited. 
• Potential loss of control – within a PLC, shareholders have a degree of control over the company’s actions as the directors are ultimately accountable to them. If more than 50% of the shares are sold, there is even the possibility that members could take over and oust the director of the company. Publicly listed firms have much less control over who buys shares, and shareholders could influence the company with a very different strategic view to the directors.
• Greater need for transparency – because members of the public invest in PLCs, these organisations must publish full details of their financial situation and recent performance on a yearly basis. Once in the public domain, this information is accessible to all; any downturn in performance could result in negative press and a loss of confidence in the firm.
• Stock market vulnerability – although being on the stock market allows an organisation to access share capital, it also leaves it exposed to the effects of any changes in share value. Negative attention in the media can reduce the value of a company’s shares, and the perceived success of the company very much ties into its share price.
• Vulnerable to takeovers – if another business wants to take over, they can buy up shares in the organisation and exercise their shareholder power to force through the decision from within. This leaves PLCs very vulnerable to hostile takeover situations.

How to set up a public limited company

If becoming a PLC still seems like the correct route for your business, then you’ll want to know more about setting one up. This section outlines the registration process and your initial public offering (IPO).

The registration process

Before you can begin the process of setting up a PLC, the organisation must fulfil specific criteria:

• It must have at least two shareholders and directors;
• 25% of its shares must have been issued to the public, amounting to a minimum share capital of at least £50,000 or the equivalent in euros;
• It must employ an ICSA-qualified company secretary.

To register the business as a PLC, you’ll need to gather together the following information:

• The proposed name of the company (this must end in ‘Plc’ and be unique, so use the Companies House availability checker tool );
• The company’s registered office address;
• The personal details of the directors, along with information regarding any directorships and shareholdings they own;
• Details of the initial shareholders, including names, addresses, and the number of shares issued.

The next step is to prepare your memorandum and articles of association . If you register online, the memorandum generates automatically – those who register by post should use the Government’s memorandum template . For the articles of association, you can either use the model articles provided or create your own based on these.

Once you’ve got this ready, you can register your company online . Alternatively, to submit your application by post, you’ll need form IN01 .

Before you can begin operating as a PLC, you’ll need to obtain a trading certificate demonstrating that you’ve satisfied the necessary criteria. You can apply for this using the SH50 form .

Your initial public offering (IPO)

An initial public offering (IPO) is the method used to go public and make shares available once you register as a PLC. Before this can happen, your business will be audited to ensure that it is in a strong enough financial position – you’ll then prepare a registration statement to file with the Financial Conduct Authority (FCA) . 

Your application will then be passed on to the stock exchange of your choice (for example, the London Stock Exchange). If approved, you’ll need to contact an investment bank to help you decide how many shares to offer on the exchange and the price at which to set them.

Accounting requirements and responsibilities

There are a number of requirements and responsibilities that come with setting up a PLC, most of which centre around its accounting. All PLCs must:

• Have their accounts audited (unless exempt) and file these with Companies House once a year – the first accounts must be submitted with 18 months of incorporation compared to 21 months for private companies;
• Send an annual return to Companies House, updating them on changes to directors and shareholders;
• Inform HMRC of taxable profits by submitting a Company Tax Return within six months of the end of the financial year, then pay any Corporation Tax that’s owed each year;
• Publish the full details of current profits, financial position, and tax responsibilities to members of the public via annual statutory accounts;
• Invite all shareholders to an annual general meeting (AGM), at which the accounts and dividends are discussed;
• Ensure that company directors complete a Self-Assessment Tax Return on a yearly basis.

It’s worth noting that the Government is much harsher with PLCs than private companies when dealing with failure to fulfil these responsibilities. For example, the fines for late filing of accounts are usually four to five times higher for publicly listed firms.

Who owns a public limited company?

While PLCs are run and managed by the board of directors, the shareholders own them. Ownership of the organisation is split between all of the members who own shares. Each member’s degree of control over the company’s operations is dictated by the proportion of the shares they hold.

This guide has explained all you need to know about public limited companies, from their basic features through to the process of setting one up.

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What is a Public Limited Company?

A public limited company is the legal status of any firm which has offered shares for purchase to members of the general public through an initial public offering or direct public offering. 

Shareholders of a Public Limited Company have limited personal liability for debts and obligations of the company?

Whre is the Public Limited Company Common?

Public limited companies (PLCs) are commonly used in the United Kingdoms and in a number of Commonwealth nations. 

By contrast, the designation is not used in the United States and a number of other nations. 

Are Public Limited Companies Listed on Stock Exchanges?

Public limited companies can either be listed or unlisted on stock exchanges.

How are Public Limited Companies Regulated?

Public limited companies are regulated by the authorizing government and are mandated to publish their financial reports to the public. 

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• Published: 16 August 2021

Impact of corporate social responsibility on organization’s financial performance: evidence from Maldives public limited companies

• Ibrahim Sameer   ORCID: orcid.org/0000-0002-1177-4066 1  

Future Business Journal volume  7 , Article number:  29 ( 2021 ) Cite this article

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The main objective of this study is to determine the CSR disclosure and to find out the association between CSR and FP by the public companies of Maldives. This study used a mixed-method research choice and is longitudinal research. The study period was from 2014 to 2018. Data were collected from annual reports of the listed companies in MSE. The sampling technique used was judgmental sampling, and the data were analyzed from STATA 15 software by using panel data regression. The finding reveals that diversity and ROA, environment and ROE, diversity, and EPS, and when the size of the firm controlled, there exhibit significant negative relation between CSR and ROA; hence, it can conclude that there exists a significant negative relationship between CSR and FP. This study has implications for the academician and corporate world in understanding CSR and FP in developing countries like the Maldives. One of the main consequences of this study is the CSR framework adopted in this study which is not a custom-tailored instrument specific to the Maldives instead chose from another research paper. Further, the sample size was also very limited due to that generalization may not be possible in a large population. This paper spreads the understanding of the relationship between CSR and FP.

Introduction

Corporate social responsibility (CSR) is one of the most controversial and significant topics since the 1950s, and it has been growing since then [ 29 ]. CSR discipline is one of the rigorous research areas among practitioners and academicians [ 28 ]. In the history of the corporate world for the first time, CSR was mention by Bowen [ 21 ] in his seminal book Social Responsibility of the Businessmen in 1953. In his book, the central question, he argues that and continues to be asked, was “ what is the responsibilities to society may businessmen reasonably be expected to assume .” Bowen [ 21 ] also stresses the importance of knowing business ethics so that it can lead to superior enduring performance. Cruz et al. [ 43 ] confirm that CSR initiatives are significant in the context of business ethics and found a healthy positive attitude toward business ethics and CSR.

Despite the long history of CSR discipline, up to date, it remains to be debatable and immature in some areas. For instance, one area that is debatable and one of the central focus given is determining the relationship between CSR and corporate financial performance (CFP). According to Das and Bhunia [ 47 ], the whole literature on this area can be categorized into three. Some studies show a positive correlation between CSR initiatives on FP [ 167 , 197 ] and Yeganeh and Barzegar [ 7 ]. On the other hand, Hirigoyen and Rehm [ 78 ] and Madugba and Okpara [ 118 ] found negative correlation between CSR and FP. Lastly, [ 35 , 104 ] found no correlation between CSR and FP.

During the past six decades of CSR discipline, numerous finding has caught the attention of CSR practitioners and academicians [ 195 ]. These studies results suggest that CSR provides insurance like effect on financial performance against adverse events of company [ 147 , 203 , 204 ], CSR initiatives can enhance employee organizational commitment and organizational performance [ 5 ], and most of the workers like to work and can attract more potential employees for an organization that has an excellent reputation for being socially responsible [ 69 , 77 , 112 ]. Therefore, now a day to pursue sustainable development and enhance the goodwill of companies has started to publish CSR disclosures in annual company report or CSR reports.

In the Maldives, it is not mandatory for public companies to publish the CSR report. Nowadays, companies announced CSR disclosure through the annual report. It indicates the prominence given by companies to CSR activities, but the effect of CSR on financial performance is not locally being investigated so far in the Maldives, due to several reasons. First, research base culture did not exist in the Maldives and recently public university came into the picture. Secondly, public companies in the Maldives assume that similar management practices (such as CSR) adopted by foreign countries might be relevant in the Maldives. According to [ 181 ], most of the research done on CSR is investigated in a western developed nation such as the USA, UK, Germany, and Australia and is not that clear whether it can apply in developing nations. Burton et al. [ 25 ] and Khan [ 97 ] suggested that to understand CSR, it is a must to understand the cultural aspects of that country because developed nations' influential factors may not apply to the Maldives. Third, there is no CSR measurement practice in the Maldives and how it should report. Fourth, the impact of CSR on financial performance has not been investigated locally so far in the Maldives. Due to these reasons, it is worth investigating the association between CSR and financial performance.

From the above discussion, it is clear that most of the research done on CSR was dominated by a western developed nation such as the USA, UK, Germany, and Australia [ 181 ]. According to Das and Bhunia [ 47 ] though there are intensive empirical research done in order to find relationship between CSR on FP [ 14 , 62 , 137 ], the result of previous studies is indeterminate. Hence, this is a gray area with inconclusiveness, and this research gap motivates the researcher to conduct a study on this topic.

According to Wang et al. [ 196 ], there are numerous researches on CSR discipline in respect of FP in foreign countries, especially in developed nations, indicating a dearth of studies in the Maldives context. As per the researcher's knowledge so far, there is only one study done [ 175 ] in the local context on CSR. In that research, the author investigates the CSR context in the Maldives and has not explored the CSR and FP relation. Hence, this provides a gap for further studies in finding the relationship between CSR and FP in public listed companies in the Maldives. Therefore, this study of CSR and FP in public listed companies in the Maldives tries to attempt to fill this gap in the literature.

To establish whether CSR (community, workplace, environment and diversity) positively/negatively correlated with Financial Performance (FP) of public companies in Maldives using ROA.

To determine whether CSR (community, workplace, environment and diversity) positively/negatively correlated with Financial Performance (FP) of public companies in Maldives using ROE.

To decide whether CSR (community, workplace, environment and diversity) positively/negatively correlated with Financial Performance (FP) of public companies in Maldives using EPS.

Following this brief introductory section, the rest of the paper is divided in the following manner: “ Literature review ” section discusses the meaning of CSR, why companies engage in CSR and empirical evidence of CSR and FP and theoretical framework. “ Research methodology ” section discusses the data collection and sampling procedure, model used in the study and the specification test. “Finding and analysis” section presents the empirical findings and discussion of the results, and finally, “Conclusion” section is the conclusion of the paper.

Literature review

According to [ 27 ], there were a vast number of definitions of CSR that have emerged in the academic literature. Some of the notable contributors that have defined CSR include [ 21 , 30 , 56 , 91 ]. In general, CSR can be defined as its responsibility toward its ecosystem.

Although there is a diverse definition given by scholars around the globe about CSR, there is no universally accepted definition of CSR [ 45 ]. Dahlsrud analyzed 37 most commonly used definitions of CSR. He concluded that there is a lot of congruency in the description and suggested that there are five dimensions in all the explanations and those are environmental, social, economic, stakeholders, and charity dimension. In the same tone [ 161 ] stated that there is no unique definition of CSR that can be acceptable around the globe. Finally, Hamidu et al. [ 72 ] reviewed CSR definition, its core characteristics, and theoretical perspective. They have suggested that in the academic world, there is no clear agreed definition of CSR, and the lack of homogeneity in the definition of CSR is due to the ever-shifting roles of CSR in the corporate world.

Empirical evidence regarding the relationship between CSR and FP

In the academic literature, the theoretical linkage between CSR and FP of the organization found inconsistency results [ 122 , 139 ]. Hence, the body of knowledge in this regards can be categorized into three spectra that is some argue that CSR can enhance FP of the organization, other researchers argue that CSR rather reduced firms’ performance, and finally, other schools of thought argue that there exists no relation between CSR and organization performance. Table 1 describes the summary of empirical findings of CSR and FP researches, and also it highlights the different variables used in the various study.

Researchers that are in favor of CSR and FP linkage argue that when company initiates CSR activities, it creates positive image in the mind of stakeholders; hence, the more company satisfy its stakeholders, the better financial performance of the company [ 51 , 53 ]. Likewise, the other proponents on this linkage advocate that by satisfying the interest of stakeholders and being more accountable to them can have positive effects on the financial performance of the company [ 38 , 151 , 201 ]. In light of stakeholder’s theory, [ 19 , 135 ] stated that consumers are willing to pay premium price for CSR initiatives companies’ products, and CSR activities can improve the image of the company among consumers and it help to improve customer loyalty [ 123 , 150 , 158 , 173 ]. Likewise, Turban and Greening [ 184 ] posit that CSR firms can attract more potential applicants, which in turn can be a competitive advantage for the organization. Another recent research done by them [ 68 ] documented that socially responsible companies can attract more talented employees to work on that organization, and also CSR firms can retain their employees over a long period, hence, it can lead to a competitive advantage over other companies. The proponent believed that engaging CSR-related programmed can benefit the organization in several ways, such as reduction in labor turnover [ 206 ], enhance reputation of company and achievement of business strategy [ 86 , 207 ], created sense of belongingness [ 34 ], attract more talented staffs [ 92 , 117 ], job satisfaction [ 109 ] and Sharma and Mishra [ 162 ] and be more committed to their work [ 20 , 54 ].

Conversely to the above argument, [ 58 ] advocates that there is only one responsibility of a corporate firm that maximizes shareholders' wealth. In line with this argument, [ 143 ] supports [ 58 ] claim stating that CSR is motivated by a socialist-collectivist agenda which are in paradox with capitalist/libertarian values of free enterprise and individualism. Furthermore, [ 132 ] suggest that the consumer does not check whether it is an SR company or not when making purchase decisions. But [ 140 ] documented that when making purchase decision consumer do take whether it is an SR company or not but the positive attitudes of consumer not transferred into actual purchase decision of consumer and this further being supported by [ 64 ] stating that buying SR product is a "moral duty" and this duty can be overridden by other preferences of consumer especially if it is budget consumer. Hence, this line of argument was stress by [ 58 ] documented that organization manager use firms’ resources for non-profit social activities at the expense of shareholders, and this has been supported by [ 88 ] in the "agency cost problem" which stated that the CSR cost incurred outweigh the benefits it brings to the company.

In the academic literature, the early research that supports the inverse relationship between CSR and FP is [ 105 , 157 , 188 ]. Vance's [ 188 ] support [ 58 ] preposition founds that being socially responsible does not bring any economic benefits to the company, rather, it reduces company stock returns. Further, this has validated by [ 11 ] who documented that the firm level of SR hinders FP compared to rivals. Likewise, [ 157 ] stated that engaging CSR activities lead wasting firms’ resources that can use in more productive opportunity for the firms. Further, they argue that managers of the company may engage in CSR not to increase shareowners' wealth, instead gain personal benefits. Looking into more recent studies on this line of the argument states that CSR is a manifestation of agency problem and is done at the expense of shareowner [ 80 ]. Moreover, [ 102 ] supported the findings of [ 157 ] and stated that the organization manager gets a good reputation at the expense of shareowner by investing more in CSR and also suggest that when the organization releases positive CSR news, then investors react slightly negative to those disclosures. Bhandari and Javakhadze [ 18 ] reveal that when an organization wants to satisfy its broad stakeholder’s entire group, then it may need to forgo lots of positive NPV project that may increase the shareholder's wealth.

The academic debate on CSR and FP has another possibility that both these are mutually exclusive, meaning CSR has no significant impact on FP of a company [ 122 , 139 ]. The scholars of this line of reasoning argue that CSR has no effect on financial performance of companies [ 61 , 95 , 137 ]. There are several studies conducted across the globe in finding the linkage between CSR and FP of specific industries or countries [ 55 ] and industries or countries specific research is incomplete up to date [ 44 ]. Kiliç [ 99 ] investigated online CSR disclosure practices by 25 banks in Turkey, the results suggest that all the banks in the country do at least disclose one dimension of CSR on the corporate website and also documented that highly visible banks disclose more information compared to the less visible bank. Furthermore, Pérez and Del Bosque [ 148 ] and Pratihari and Uzma [ 156 ] investigated CSR disclosure in Spain (former), and India (latter) founds that CSR positively impacts a customer in identifying the bank and CSR helps company in building brand and customer loyalty. Due to stated reasons, [ 14 , 83 ] found a positive association between CSR and FP. On the other hand, the influence on industry characteristics is also another area that has been investigated by scholars. For example, [ 15 ] called for more research to be done on potential heterogeneity of CSR’s influence on organizational performance across different industries. The reason for that is due to the impact the organization that brings to society is different. For instance, compared to other industries (such as banking, tourism and retail), the controversial sector (e.g., tobacco, alcohol, petroleum, utility, and steel) harms the environment more [ 89 ]. Therefore, [ 177 ] suggested that controversial industries are exposed more to the environment and social risk; therefore, companies in these industries need to do more CSR activities to gain the confidence of stakeholders.

Looking into empirical side of CSR and FP indicated positive relation mostly in developed and developing nation [ 14 , 42 ] and Maqbool and Bakr [ 162 ]. Conversely, some empirical studies show the inverse relationship between CSR and FP [ 169 ] and Hirigoyen and Rehm [ 78 ]. Yet there is body of empirical knowledge that do not support either of the above argument and those scholars found neutral or no relation between CSR and FP [ 95 , 109 , 137 , 163 ].

Though there are controversies in the above empirical studies, [ 32 , 142 ] conducted two different meta-analysis using 30 years of data. The authors have documented that CSR positively correlated with CFP. Further, another meta-analysis conducted by [ 17 ] also found that there is clear empirical evidence for a positive relation between CSR and FP. Conversely [ 123 ] meta-analysis of 251 studies documented positive (but small) association between CSR and FP. But meta-analysis of [ 146 ] included 159 reviews and recorded that 63% of the studies show positive, 15% indicated the contrary, and 22% shows a neutral or mixed association between CSR and FP.

In light of above discussion, it is clear that CSR and FP are inclusive in the academia. Therefore, this paper tries to investigate empirically whether there is any association between CSR and FP in developing nation such as Maldives. Most of the literature done in this discipline is in the developed nations, few studies in the developing nation, and no studies in the context of Maldives. Furthermore, this study tries to fill the imbalance that is there in the academia when public advocate companies in Maldives become more CSR orient. Hence, different hypotheses developed for this paper are given under conceptual framework (Fig. 1 ).

Conceptual framework

Research methodology

Population and sample.

This study focuses on listed companies of MSE. At present, there are eight companies listed in the stock exchange; two companies do not fit in the study period because the study period of this research is from 2014 to 2018. For this study, the remaining six companies' data have taken as a sample (75% of the population). This study adopts non-probability sampling and uses judgmental sampling techniques. Judgmental sampling is more useful when the researcher desires to collect data from a specific group to bring more reliable and precise results [ 171 , 179 ]. Žmuk et al. [ 208 ] recommended that if the researcher's target population is small, then to get satisfactory precision and accuracy level of the parameter of the estimate, researcher needs to include 70% of the samples population; here, in this study researcher study 75% of the population.

CSR framework for this study

It has been observed that CSR disclosure made by Maldivian Public companies is voluntary, and also it has been observed that there is no specific CSR framework in the Maldives. In determining CSR disclosure in academia, there are many different indices used in measuring CSR disclosure. The most well-known indices include: Dow Jones Sustainability Index [ 37 ], Fortune magazine reputation index [ 159 ], Global Reporting Initiative [ 113 ], MSCI KLD 400 social index [ 160 ] and Vigeo Index [ 100 ].

These indices have widely used in academia for measuring CSR performance (Waddock and Graves [ 191 ]). CSR disclosures vary between countries to countries, and there is no " one size fit all " approach [ 79 ]. For example, [ 199 ] argues national culture, political, and the civil system which often determines CSR disclosure. Xiao et al. [ 202 ] stated that CSR disclosure depends on the stage of social and economic development of the country. Moreover, [ 46 ] noted that the theories that are in the developed countries might not be entirely applicable due to different drivers of CSR. Conversely, in developing countries, CSR is more toward the economic environment (such as creating more jobs), filling government shortfall areas, and philanthropic charitable donations and ethics.

Furthermore, [ 59 ] stated that at this time, there is no generally accepted CSR reporting standard across the globe. In the same vein, [ 180 ] noted that the western world CSR concept could not be adapted as it is. It required modification based on the country/geographical needs. Therefore, in this study researcher is going to use the CSR standard developed by [ 122 ]. The adoption of this "CSR instrument" for this study is due to three reasons. Firstly, they have designed that instrument by taking into account different international standards, and academic literature [ 165 ], Centre for Corporate Research and Training 2003, Confederation of Indian Industry 2002). Secondly, it is developed based on the developing nation's cultural needs and thirdly very latest instrument.

Content analysis and coding procedure

This study uses the content analysis technique and uses the annual report to developed CSR index for public companies in the Maldives. Content analysis is a technique that has been commonly used in social science research for quite a long period [ 3 ]. Further, this method has been quite often used in CSR and FP research as well [ 62 , 95 ].

In content analysis, themes must be developed to make an inference from the data. In line with this reasoning, Milne and Adler [ 130 ] stated that construction and categorization of schemes are the essential part when using content analysis. This research adopted the [ 122 ] CSR framework; hence, the researcher used the categories of [ 122 ] CSR framework. It includes mainly four components, namely community, environment, workplace, and diversity. In this study, each public company listed in MSE has coded about different CSR disclosure categories identified in the annual report. Companies CSR is measured using adopted CSR framework under each category, there are eight different themes, and based on that researcher decides whether it is CSR disclosure or not.

One of the prerequisites of content analysis is that it requires systematic coding using predetermine criteria [ 70 ]. For this study, the different keyword used is the work of [ 122 ] CSR framework. This makes the coding process straightforward, and also it lessens the prejudice in determining CSR disclosure and how to categorize them. When the keyword and categories are used, it helps in decision rules, and also it improves the reliability and accuracy of the coding process [ 130 ]. For this study, the researcher uses the unit of analysis as a “ sentence .”

The procedure used in the content analysis of this study is that two independent coders were selected. Before coding and classification process begins, these two coders are given full training by the researcher on CSR disclosure, use of coding instruments, and explanation of different categories and types of disclosure in [ 122 ] CSR framework. In order to check degree of reliability and accuracy of intercoder, this study used four main methods that are used in checking the validity of content analysis [ 62 , 95 ], that is percentage of agreement [ 41 , 178 ], Scott’s π [ 174 ], Cohen’s κ [ 41 ] and Krippendorff’s α [ 101 ]. The intercoder reliability test of this study is presented in the below table.

After reviewing different methodologies in the content analysis, [ 136 ] suggested that a reliability test coefficient value higher than 0.90 would be acceptable at all levels, and any amount above 0.80 would be acceptable in most cases and stated that there exists a significant disagreement between the coder. Therefore, based on the accuracy benchmark suggested by [ 136 ], the results are cited in Table 2 , and all the reliability test values are higher than 0.90. Hence, it is safe to conclude that the reliability of this study is considerably high because the reliability test values are significantly higher than benchmark values.

Data collection procedures and sampling

In this study, the content analysis is used in extracting CSR information from the annual reports of the company, and CSR has been divided into four categories (community, environment, workplace and diverse) covering 32 items, to change qualitative information present in the annual report; this study used content analysis and changes that qualitative data to quantitative information using a dichotomous approach. In the dichotomous approach, if the item is disclosed (CSR instrument), then “1” is given, and if items not disclosed, then “0” and total CSR score of “ T ” company is calculated based on the following formula.

where di = “1” if disclosed and “0” if not disclosed. n  = maximum number of disclosed.

In this study, the proxy of CSR categories is considered as community, environment, workplace, and diverse, and the FP proxy is considered as ROA, ROE, and EPS, and moderating variables considered as firm size. The following section details down how the ration is calculated.

Return on asset (ROA)

ROA measures profits as a percentage of total assets, and ROA gives an impression to the investors how efficient the company in managing its assets in generating profits. The higher the ROA, better it is, and the formula used in calculating ROA is given below [ 69 ]:

Return on equity (ROE)

ROE measures profits as a percentage of total shareholders’ equity, and ROE gives an impression to the investors how efficient the company is generating profits using its shareholder's funds, or in other words, it measures profits made on each dollar of shareholders’ funds. ROE is calculated using the below formula [ 69 ]:

Earning per share (EPS)

EPS measures earning made for each common stockholders, and it also shows how much money the company is making for its stockholder; as a rule of thumb, if EPS is higher, better it is. EPS is calculated using the below formula [ 69 ]:

In the academic literature on CSR discipline, different scholars have used different control variables [ 193 ] such as firm size, firms age, firms leverage, capital intensity, and industry heterogeneity. For this study researcher going to use “firm size” as the control variables, the reason for that is because previous research has shown that larger firm tend to spend more on CSR than smaller firm [ 168 ], larger firm seen as the leader of the industry or they are the playmaker in the industry [ 76 ]. To measure the firm size, this study used the natural logarithm of total assets and is calculated using the following formula:

Panel data analysis

To test the hypothesis, “ Stata 15 ” software is used for quantitative data analysis. The data were gathered from 2014 and 2018 to test the relationship between CSR and FP. To test the relationship between CSR and FP, many scholars have used regression analysis [ 36 , 38 ]; however, this kind of analysis was critics by its multicollinearity errors [ 189 ]; hence, to avoid that error this research is going to used panel data, and panel data have widely been used in academia in order to check the relationship between CSR and FP [ 111 , 180 ].

The model used in the study

The CSR dimensions used in this research are community, environment, workplace and diverse; on the other hand, financial performance dimensions used are ROA, ROE, and EPS, and the control variable used in this study is the firm size. The independent variable and dependent variables of this study are CSR and FP, respectively. To estimate the direct relationship between CSR and FP, the three dependent variables (ROA, ROE, and EPS) equation used in this study can be expressed in the following ways:

where ROA = return on assets, ROE = return on equity, EPS = earning per share, Comm = community, Div = diverse, Env = environment and Wor = work.

To estimate the indirect relationship between CSR and FP, the moderating variables are included in the above equation, and it can be stated in the following ways:

where ROA = return on assets, ROE = return on equity, EPS = earning per share, Comm = community, Div = diverse, Env = environment, Wor = work and Fsize = firm size (natural logarithm of total asset).

In this study, three different kinds of panel data models are used, namely the pool regression model by OLS (ordinary least square), fixed-effect model, and random-effects model. In the pooled regression model, it pooled all the data together, ignoring the time series and cross-section nature of the data; hence, when pool regression combined all the data into one, it ignores the heterogeneity of the data that may exist [ 152 ].

The next model that is there is a fixed effect model (FEM) or LSDV model (least square dummy variables). This method allows for individual differences, meaning that it will enable heterogeneity compared with the OLS method. FEM methods are used in social science and business management research, by various academicians [ 13 , 40 ]. The main advantage of using this method is that it estimates the effects of independent variables on the dependent variable while controlling the effects of unobserved variables [ 162 ].

The last but not the least model used in this study is the random effect model (REM). One of the assumptions of REM is that the individual-specific effects are not correlated with the independent variables. Therefore, in the REM model, it can have varying interception value between cross-sectional data, and this variation is purely random. The main advantage of REM is it helps in controlling for unobserved heterogeneity when the heterogeneity is constant over time. The FEM and REM model can be denoted in the following formula, respectively:

where \(u_{i}\) is a fixed or random effect specific to individual (group) or time period that is not included in the regression, and errors are independent identically distributed, \(v_{{it}}\)  ~ IID (0, \(\sigma ^{2} _{v}\) ).

Specification test for the study

For this study, the researcher used three above discussed model, and to choose the best model, the following specification test has been carried out to select the best model.

Pooled OLS model or FEM model

This test examined whether pooled OLS or FEM model is best in examining the group effect in the panel data set. The hypothesis significance can be check through F -test value; if the null hypothesis is accepted, then pooled OLS is better than the FEM model [ 200 ]. The null hypothesis is stated in the following manner:

Pooled OLS model or REM model

This test examined whether pooled OLS or REM model is best in examining the random effect in the panel data set. REM can be tested through the Breusch–Pagan Lagrange multiplier (LM) test [ 200 ]. The hypothesis significance can be checked through Chi-square value; if the null hypothesis is accepted, then pooled OLS is better than the REM model. The null hypothesis can be stated in the following manner [ 4 ]:

FEM or REM model: Durbin–Wu–Hausman test (Hausman specification test)

Hausman specification test runs to check whether FEM or REM is the most appropriate model in the panel data. The Hausman statistic χ 2 is computed from the following formula [ 4 ].

where βc  is the coefficient vector from the consistent estimator. βe  is the coefficient vector from the efficient estimator. Vc  is the covariance matrix of the consistent estimator. Ve   is the covariance matrix of the efficient estimator.

The hypothesis for Hausman specification test can be stated as follows:

If the p value is less than 5%, then reject the null hypothesis and accept an alternative hypothesis meaning that in that case, the FEM model is more appropriate than the REM model. On the other hand, if the p value is more than 5%, then accept the null hypothesis meaning that the REM model is more appropriate than the FEM model [ 4 , 200 ].

Findings and analysis

Relationship between csr and fp, dependent variable: roa.

In assessing the impact of CSR and FP, Table 3 shows the results obtained from the regression analysis between the independent variables, which are data capturing the CSR and the dependent variable represented by ROA. The panel analysis for the pooled, fixed, and random effect model is presented below without the control variable.

The specification test shows that the random model is the most appropriate model for this analysis. The R -squared of 0.2568 indicates that the independent variables explain about 25.68% of the variability in the dependent variable ROA. Furthermore, the result shows that there is a strong negative relationship between diversity and ROA, while the result did not show a significant relationship between community, environment, work, and ROA. The random effect model can be specified below as follows:

After controlling for the size of the company, the result shows that size has a highly statistical significant P value of 0.000. However, the relationship between size and the ROA of firms exhibits a negative relationship, as shown in Table 4 . The result further shows that diversity has a significant negative relationship with ROA as it was before the control variable added to the model, and this shows that a percent increase in diverse will bring about a 44.78% decrease in ROA. Community, environment, and work did not show a significant relationship with ROA.

The R -square, which shows the extent to which the independent variables explain the model, has a value of 70.76% (0.7076). This means that the model explains about 70.76% of the variability in the ROA of the companies. The P value of 0.000 of the F -test shows that the model is a good fit, and the overall significance of the model is subtle. CSR relationship has been examined by different researchers, and the coefficient of size as a control variable has varied, though most of the time, always found significant [ 159 ].

The result from the random effect model with the control variables can be specified as follows:

Dependent variable: returns of equity (ROE)

Table 5 presents the result of the regression analysis using pooled OLS, fixed effect, and random effect model with ROE as the dependent variable. The number of companies examined is six, and the time period was 5 years.

The two-specification test shows that the pooled OLS is the most appropriate model for this analysis. The R -squared of 0.2506 indicates that the independent variables explain about 25.06% of the variability in the dependent variable ROE. The result also shows that there is a strong negative relationship between environment and ROE, while the result did not show a significant relationship between community, diverse, work, and ROE. The Pooled model can be specified below as follows with ε representing the unexplained part of ROE:

The pooled OLS result with control for the size of the company shows that the size of the company is not statistically significant as it has a P value of 0.163. Also, the relationship between size and the ROE of firms exhibits a negative relationship, as shown in Table 6 . The result further indicates that community, diverse, environment, and work did not show a significant relationship with ROE.

The R -square value, which represents to what extent the independent variables, explains the model comes out with a value of 0.3103. This means that the model explains about 31.03% of the variability in the ROE of the companies. The P value of 0.0927 of the F -test shows that the model is not overall significant.

The result from the pooled OLS model with size as the control variables can be specified as follows:

Dependent variable: EPS

Table 7 shows the results obtained from the regression analysis between the independent variables, which are data, used to cover the CSR and the dependent variable represented by EPS. The panel analysis for the pooled, fixed, and the random effect is presented below without the control variable.

The fixed-effect model is the most appropriate model for this analysis, as shown in Table 7 by the specification test. R -squared of 0.1658 shows that the independent variables explain about 16.58% of the variability in the dependent variable EPS. Furthermore, the result shows that there is a strong negative relationship between diversity and EPS, while the result did not show a significant relationship between community, environment, work, and EPS. The fixed-effect model can be specified below as follows with ε explaining the part of the model not captured by the independent variables:

In adding the control variable, which is the size of the company, the result shows that firm size has an insignificant statistical P value of 0.639. However, the relationship between size and the EPS of firms shows a positive relationship, as shown in Table 8 . The result further shows that diversity has a significant negative relationship with EPS as it was before the control variable added to the model. Lastly, community, environment, and work did show an insignificant relationship with EPS.

The R -square, which shows the extent to which the independent variables explain the model, has a value of 0.1100. This means that the model explains about 11% of the variability in the EPS of the companies. The P value of 0.1014 of the F -test shows that the overall model significance of the model is not strong enough.

The result from the fixed effect model with the control variables can be specified as follows:

Testing for multicollinearity

As presented in Table 9 , the multicollinearity result, which based on the rule of thumb, is that if VIF with a value less than five but must not be more than value is 10. The result shows that there were no multicollinearity problems with the independent variables. The work variable has the highest collinearity, but however, it is not more than 10. The values of all the VIF are still within the acceptable level of not more than 10.

CSR and FP relation

Table 10 depicts a summary of the hypothesis tested in this study. The subsequent part of this section discusses in detail the CSR and FP relationship of this research.

Relationship between community and FP (ROE, ROA and EPS)

Based on the findings of the study, H1, H2 and H3 were rejected, meaning that there is no significant relationship between CSR (community) and FP (ROE, ROA and EPS). This finding contradicts previous literature and there can be several possible reasons for that.

Firstly, CSR is a novel idea that “ creating shared value ,” which is proposed by Porter and Kramer [ 69 ] in the HBR. The basic idea behind this principle is that an organization generates economic benefit by way of creating value for the society, but [ 164 ] stated that this norm is not valid. The reason for the invalidation of Porter and Kramer [ 69 ] preposition is because CSR is multifaceted, so just by philanthropic giving the shared value cannot achieve, rather a company should develop a clear CSR program that aligns with the business purpose. In line with this reasoning [ 175 ] stated that in the Maldives only a few companies have formal CSR strategy. Thus, just by donating money to the community by the Maldives, public companies may not increase the FP of the enterprise. Furthermore, [ 164 ] suggested organization should run planned coordinated CSR program, otherwise that may not bring any benefits to the company, in line with this rational [ 175 ] stated that companies in the Maldives conduct CSR activities more “ informal and unplanned ” ways and indicated that in the Maldives only 23% of companies consult relevant parties when planning CSR programs for the upcoming years hence, that might be the reason for insignificant results of this study.

Secondly, CSR initiatives vary from industry to industry [ 31 ]. In line with this argument, [ 66 ] stress “ consumer service ” industries such as banking, general retail, and insurance, etc., companies focus more on community engagement CSR programs. Conversely, “ heavy ” industries such as oil and gas refining and utility, etc. companies concentrate more on natural environment CSR programs than community involvement programs. Hence, the CSR initiatives undertaken by Maldives public companies might have overlooked the industry it operates when developing CSR programs. That might be the reason for the insignificant result of this study.

Thirdly, McLennan and Banks [ 162 ] stated that understanding the need of the local community framing CSR community development programs is a necessity because of the heterogeneous nature of the city. Eweje [ 52 ] points out the main reason for the failure of the CSR community development program is due to not addressing the social and environmental issues that are intended to solve and lack of trust community have on the company. In the case of Maldives, some of the public company community development CSR programs politically driven. Shareef et al. [ 175 ] affirm in the Maldives, most of the prominent local entrepreneur is politically motivated. Hence, the CSR initiatives undertaken by Maldives public companies might be politically driven, conduct CSR community development programs without assessing needs, and unfulfilled promise leads to mistrust between companies and community might be the reason for the insignificant result of this study.

Relationship between environment and FP (ROE, ROA and EPS)

Based on the findings of the study, H4 was accepted, meaning that there is a significant relationship between CSR (environment) and FP (ROE), but the results found are negative. This finding is in line with [ 116 , 159 ]. These scholars argue that when the firm engages in disclosing environmental-related CSR programs leads to negative financial performance, and the reason is the cost involve in such programs outweighs the cost than the benefits it brings to the company. Shareef et al. [ 175 ] affirms that in the Maldives, only 18% of businesses people believe cost reduce when the organization engages in CSR (environment) related activities.

Conversely, based on the findings of the study H5 and H6 were rejected, meaning that there is no significant relationship between CSR (environment) and FP (ROA and EPS). Therefore, this study finding contradicts previous other literature and there can be several possible reasons for that.

Firstly, Maldives is a developing country, and the state regulates most of the corporate-related things as the caretaker of the country. Therefore, most of the things related to environment protection such as air pollution, biodiversity, carbon emission, deforestation, and energy efficiency strictly governed through laws and regulations rather than business-driven initiatives. According to [ 134 ] CSR as a voluntary contribution and does not require laws to follow. But in developing countries like the Maldives, CSR is more government-driven than business-driven. As discussed earlier, a caretaker of the society government has enacted and made a mandatory requirement for business by law that may be related to the environment. Hence, stakeholders in the Maldives do not consider mandatory CSR disclosure as real CSR initiatives. Due to that, the improved financial benefits may not be evident in environment-related affairs.

Secondly, the so-called " environmental investors " are still the minority in the investor's markets [ 7 ]. A country like the Maldives, where CSR is at its infancy stage, may not have " environmental investors ." In line with this reasoning [ 175 ] stated that CSR in the Maldives is " mediocre " and documented that environmental protection and ethical standards are CSR practices of business, but customers do not consider environmental protection and ethical standards are CSR practices that local companies should adhere. Therefore, in the Maldives context, " environmental investors " dilemma might not be true due to that in the short term, firms may not gain any financial benefits.

Thirdly, CSR disclosure between the firms, especially the Industry, which it operates, leads to more CSR disclosure [ 22 , 60 ]. In line with this thinking [ 190 ], argue that companies that negatively affect the environment tend to disclose more compare with other Industry. In line with this reasoning, [ 175 ] suggest that the primary focus of tourism companies in the Maldives focuses on environment protection than any other aspect of CSR. The other business owners belong to other Industries focus their CSR activities on another aspect, such as community development. In line with this thinking, most of the sample companies listed in the MSE not regarded as a controversial Industry hence financial gain not materialized.

Relationship between workplace and FP (ROE, ROA and EPS)

Based on the findings of the study, H7, H8 and H9 rejected, meaning that there is no significant relationship between CSR (workplace) and FP (ROE, ROA and EPS). This finding is in line with [ 93 , 155 ], which stated workplace and FP have no significant relation. On the other hand, this finding contradicts previous literature and there can be several possible reasons for that.

Firstly, in the academic literature, CSR and workplace (employees) show a very positive picture. CSR-related programmed can reduce labor turnover, created a sense of belongingness, attract more talented staff, and be more committed to their work. Conversely Brieger et al. [ 162 ] advocated that the dark side of the CSR has not been explored. CSR companies might do some window dressing to portray to the public that the company is a socially responsible company at the expense of employees [ 7 ]. For example, in the Maldives, some public companies' MD salary is very high, but the employee's salary was not competitive. Previous literature shows that socially responsible reputed companies' wages are significantly low [ 138 ]. Furthermore, Brieger et al. [ 162 ] founds that working in CSR committed company may lead to employee work addiction, which may harm the well-being of the worker, family, and friends. Due to the stated reasons, employees working in public companies in the Maldives may not have considered CSR disclosure is vital.

Secondly, [ 175 ] affirms that in the Maldives, employees are the major second most frequently target group of CSR activities. They suggest that companies provide medical expenses coverage, different training programs, recreational activities, and some financial assistance programs as well, and these things lead to workers' loyalty to boost by 52%. The single most striking observation that emerges from the study shows no significant relationship, and this is an alarming result. A likely reason is that the investment made by Maldivian public companies on human capital outweighs the FP measured during the study period. There can be a possibility that Maldivian public companies have taken substantial steps toward the development of the workforce in their organization. However, the organization may not have reaped the benefits in the form of financial gain.

Thirdly, CSR is considered as “ two-way street ” Tsavdaridou and Metaxas [ 183 ] that mutually benefits both (stakeholders and business) parties. Contrary to this line of reasoning [ 175 ] suggest that in the Maldives, CSR is perceived to be “ one-way street ” rather than “ two-way street .” Further, documented that in Maldives organization does not expect anything in return on CSR activities, and if the company expects anything in return, then it is considered as the outside realm of CSR initiatives. This might be because the Maldives is 100% Muslim country, this perception comes from the Islamic religion of almsgiving (Zakat or Sadaquath), which advocates donation to vulnerable people, and by helping poor people, we should not expect material benefit return in this world.

Fourthly, sometimes, the entrepreneur may not be able to reap the benefits of CSR initiatives due to a lack of awareness of CSR among the stakeholders. This line of thinking supported by [ 175 ] posit that in the Maldives one of the most significant barriers in implementing and institutionalizing CSR within business is due to lack of awareness among the public, and it noted that 50% of the people believe that in the Maldives the main barrier in implementing CSR initiatives is due to lack of awareness.

Relationship between diverse and FP (ROE, ROA and EPS)

Based on the findings of the study H11 and H12 were accepted, meaning that there is a significant relationship between CSR (diverse) and FP (ROA and EPS), but the results found are negative. This finding is in line with [ 6 , 103 ] posited that diversity leads to negative employee productivity and performance. As stated earlier, this study found a significant relationship between CSR (environment) and FP (ROA and EPS), but the results found are negative, and there can be several possible reasons for that.

Firstly, when there is a different ethnic group within the company leads the worker to indulge in disagreements that may not directly relate to their work; hence, it may lead to conflicts between the employees, and in the end, company productivity goes down. For example, the Maldivian worker and Sri Lankan worker may argue on the religious differences among them. In line with this thinking, [ 75 ] stated a deep level of divergences between the groups could lead to a negative impact on organizational performance. Furthermore, [ 127 ] suggests that interpersonal deviations arise between the employees may lead to a negative emotion that may detrimental to organizational productivity.

Secondly, the use of emigrant workers remains widespread due to a lack of skilled labor force [ 1 ]. According to [ 131 ], the number of emigrant workers has increased by 188% between, 2000 to 2011 and estimated that, on average, a 5% increase would be there in every alternative year. These numbers show alarming figures indicating the different nationals working in various companies in the Maldives. Hence, companies' workforce diversity can have a considerable impact on organizational performance. Most of the time, in Maldives expatriate workers, does the odd job in the construction industry Maldivian considers those workers as very inferior and discriminates their workers [ 151 ]. This might be the case in public companies; hence, if the employees discriminated, then it leads to unhappy work condition may result in the productivity of the companies. In the same vein, [ 187 ] posit if employees are not happy and if they are discriminated based on their cultural differences, it will lead to low morale in the working environment and dissatisfy and at the end it leads to negative performance and affects the productivity of the organization.

Thirdly, a diverse workforce leads to employee turnover and absenteeism to go up, which leads to lower productivity of the organizations [ 26 ]. Leonard and Levine [ 110 ] acknowledged if employees are isolated based on cultural differences, age or gender from coworkers may increase labor turnover. In line with this [ 198 ] conceive that diversity leads to negative dynamics such as stereotyping, cultural classes, and ethnocentrism, and these negative dynamics lead to employee turnover and absenteeism. This might be the case in public companies in the Maldives. Hence, if diversity is overlooked or not adequately handled by the top management, it may detract the productivity of the companies.

Based on the findings of this study, H10 was rejected, meaning that there is no significant relationship between CSR (diverse) and FP (ROE). Therefore, this finding is in line with scholars that argue on diversity, and organizational performance has no relation. For example, [ 6 , 103 , 126 ] found that ethnicity diversity has no significant relation with innovation within an organization.

Conversely there is a large volume of published studies describing that diversity leads to improve financial performance [ 9 , 115 ]. As stated earlier, this study found no significant relationship between CSR (diverse) and FP (ROE), and there can be several possible reasons for that.

Firstly, according to the corporate governance code (clause 1.6(a)(v)(vi)) of Maldives, all public company boards should have a 30% representation of women [ 7 ]. But the samples taken for this study except one company remaining five companies didn't strictly follow the corporate governance code accordingly. It found that BML board have 33% of female, STO has 14% of female, Dhirague has 14%, MTDC has 22% female, Amana Takaful have 0%, and MTCC has 0% female representation. According to [ 154 ] board, diversity is not just a simple " number game ." Having the right mix of gender diversity in the boardroom leads to better financial performance [ 115 ]. Therefore, it is important for public companies in the Maldives to follow corporate governance code thoroughly so that in the future, that may improve the financial position of the company. Though currently public companies not following the CG code may not lead any adverse implication but maybe in the future, when the investors get to know the importance of diversity in the board may punish the companies.

Secondly, if the female directors appointed as “ token ,” then it may not leads to a positive impact. According [ 94 ], the theory of “ tokenism ” if the group representation is less than 15%, then it is considered as appointed as “token.” If female directors appointed as “ token ,” then it may lead to negative/no significant impact on organization performance. In the context of Maldives, the average female board representation of the six-sample company is 13%. Therefore, it is safe to conclude that there is no significant statistical relationship between CSR (diversity) and FP (ROE) in the Maldivian plc context is due to “ tokenism .”

Thirdly, a report published by the Ministry of Environment indicated that lack of women in the decision-making level is a challenge that Maldives face in a time of advocacy of gender equality and empowerment [ 162 ]. In the same vein, the UNFPA Maldives bulletin indicated that only 25% of women work in the decision making level in the country. As stated earlier in the context of Maldives, the average female board representation of the six-sample company is 13%, one of the possible reasons for that low representation can be due to the " glass ceiling ." According to [ 50 ], the " glass ceiling " is a phenomenon where the promotion of certain people, especially women, doesn't go beyond a certain level in the hierarchy. In public companies, the highest top-ranking occupation considered as the board of directors' jobs, due to cultural thinking in the Maldives and the " glass ceiling " phenomena, sometimes, female employees do have difficulty climbing up in the leader of the hierarchy and be in the boardroom. Therefore, it is safe to conclude that there is no significant statistical relationship between CSR (diversity) and FP (ROE) in the Maldivian plc context is due to the " glass ceiling " phenomena.

Control variable (firm size)

Based on the findings of the study, H13-01 and H13-03 rejected, meaning control variable firm size is not a significant thing that affects organization CSR disclosure or FP. This result is consistent with [ 182 ] and Adeneye and Ahmed [ 2 ], and they posit that firm size cannot influence CSR or FP. Further, based on finding H13-02 accepted indicating firm size have a significant effect on ROA, this result consistent with [ 33 , 141 ].

The main objective of this study is to find out the relationship between CSR initiatives to the financial performance of the public companies in the Maldives.

The results of this research broadly classified into three broad spectrums that are ROA, ROE, and EPS with CSR. ROA, as a dependent variable, result shows there is a robust negative relationship between diversity and ROA, while the result did not show a significant correlation between community, environment, work, and ROA. ROE, as a DV result also shows there is a robust negative relationship between environment and ROE while the result did not show a significant correlation between community, diverse, work, and ROE. Besides, to check the effect of the control variable on ROE, the results indicated the size of the company is not statistically significant. Similarly, the relationship between size and the ROE of firms exhibits a negative correlation. The result further shows Community, Diverse, Environment, and Work did not show a significant relationship with ROE. EPS, as a DV, the result shows there is a robust negative relationship between diversity and EPS, while the result did not show a significant correlation between community, environment, work, and EPS. Furthermore, to check the effect of the control variable on EPS, the results indicated that the size of the company has an insignificant. Nevertheless, the relationship between size and the EPS of firms shows a positive relationship. The result further indicates diversity has a significant negative correlation with EPS as it was before the control variable added to the model. Lastly, Community, Environment, and Work did show an insignificant relationship with EPS.

There are several vital contribution this study made; firstly, the CSR research done in the developing countries was very limited especially in the context of Maldives, In doing so, the results of this study suggest that public companies in the Maldives are practicing CSR, and companies are reporting CSR initiatives in the annual report of the companies. Secondly, this study has examined the relevance of different management theories that are developed in the field of CSR and tries to identify the association between different variables that affect CSR theories. This study confirms the importance of stakeholders’ theory in understanding CSR in the Maldivian market. Thirdly, this research used panel data, that is widely been used in academia in order to check the relationship between CSR and FP [ 111 , 180 ]. Therefore, this study used improved data methods in identifying the association between CSR and FP and documented that there is statistical significance between the CSR and FP of public limited companies in the Maldives. Fourthly, this study is one of its kind that has explored, the relationship between CSR and FP of listed companies in the Maldives, therefore, this study contributes existing body of knowledge as a reservoir hence in future this research work can be reference materials for researchers and students who wants to explore this subject matters in the future.

The empirical outcomes suggested in this research should be considered in the light of some constraint because no research is without limitation; hence, this study also has several limitations due to the methodology adopted by this study. Firstly, the major limitation of this study is the “ CSR instrument ” adopted by this research. Secondly, the sample size used in this study is six, and the time horizon of the study is 5 years from 2014 and 2018 due to limited companies listed on the stock exchange, and the small number of samples size might be the reason for negative results of this research. Therefore, generalizability of this research finding might not be applicable to all companies in the Maldives. Thirdly, to assess the CSR disclosure by the public companies in the Maldives, this research used the company annual report using the content analysis and to convert the qualitative data to quantitative data, the dichotomous process has been used to calculate each company CSR disclosure under each specific criterion identified in CSR framework. Since the primary documents used in measuring CSR is an annual report; therefore, the finding of this research largely depends on the quality of information presented in the annual report. Fourthly, the primary dependent variable of this study was FP, and the proxies of FP included as ROE, ROA, and EPS. This financial ratio calculated from the financial statement; hence, the reliability of this finding largely depends on the “ true and fair ” values presented in the financial statement.

Several suggestions can be given for the future researcher in making a more judgmental decision in making this research more meaningful. First is developing a “ CSR instrument ” for local context and testing the relationship between CSR and FP. Secondly, it includes more samples and extending the study duration may give more meaningful results. Further, this study purely used annual report in identifying CSR disclosure, future researcher advisable to used website information and standalone CSR report can also use that may get more meaningful results. Thirdly, this study focuses only public listed company in Maldives stock exchange; the future researcher can look into both public and private company, that may give more conclusive information related to CSR, and it can augment the external validity of the finding of this study, and also can used other advanced econometric technique that analyzes the relationship between CSR and FP such as continuous wavelet transformation (CWT) method proposed by (Kenourgios, Drakonaki and Dimitriou). Fourthly, it can include more variables or other different variables in both CSR and FP measurement and check the association between CSR and FP can augment the external validity of the finding of this study. Furthermore, different other control variables such as R and D, institutional ownership, and leverage can be used. Therefore, future work can include these variables and check the association between CSR and FP.

Availability of data and materials

Abbreviations.

Corporate Social Responsibility

Financial Performance

Return on Assets

Return on Equity

Earnings Per Share

Ordinary least-squares

Fixed Effect Model

Random Effect Model

Maldives Transport and Contracting Company

Maldives Tourism Development Corporation

State Trading Organization

Bank of Maldives

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• 15 April 2024

Revealed: the ten research papers that policy documents cite most

• Dalmeet Singh Chawla 0

Dalmeet Singh Chawla is a freelance science journalist based in London.

You can also search for this author in PubMed   Google Scholar

Policymakers often work behind closed doors — but the documents they produce offer clues about the research that influences them. Credit: Stefan Rousseau/Getty

When David Autor co-wrote a paper on how computerization affects job skill demands more than 20 years ago, a journal took 18 months to consider it — only to reject it after review. He went on to submit it to The Quarterly Journal of Economics , which eventually published the work 1 in November 2003.

Autor’s paper is now the third most cited in policy documents worldwide, according to an analysis of data provided exclusively to Nature . It has accumulated around 1,100 citations in policy documents, show figures from the London-based firm Overton (see ‘The most-cited papers in policy’), which maintains a database of more than 12 million policy documents, think-tank papers, white papers and guidelines.

“I thought it was destined to be quite an obscure paper,” recalls Autor, a public-policy scholar and economist at the Massachusetts Institute of Technology in Cambridge. “I’m excited that a lot of people are citing it.”

The most-cited papers in policy

Economics papers dominate the top ten papers that policy documents reference most.

Data from Sage Policy Profiles as of 15 April 2024

The top ten most cited papers in policy documents are dominated by economics research. When economics studies are excluded, a 1997 Nature paper 2 about Earth’s ecosystem services and natural capital is second on the list, with more than 900 policy citations. The paper has also garnered more than 32,000 references from other studies, according to Google Scholar. Other highly cited non-economics studies include works on planetary boundaries, sustainable foods and the future of employment (see ‘Most-cited papers — excluding economics research’).

These lists provide insight into the types of research that politicians pay attention to, but policy citations don’t necessarily imply impact or influence, and Overton’s database has a bias towards documents published in English.

Interdisciplinary impact

Overton usually charges a licence fee to access its citation data. But last year, the firm worked with the London-based publisher Sage to release a free web-based tool that allows any researcher to find out how many times policy documents have cited their papers or mention their names. Overton and Sage said they created the tool, called Sage Policy Profiles, to help researchers to demonstrate the impact or influence their work might be having on policy. This can be useful for researchers during promotion or tenure interviews and in grant applications.

Autor thinks his study stands out because his paper was different from what other economists were writing at the time. It suggested that ‘middle-skill’ work, typically done in offices or factories by people who haven’t attended university, was going to be largely automated, leaving workers with either highly skilled jobs or manual work. “It has stood the test of time,” he says, “and it got people to focus on what I think is the right problem.” That topic is just as relevant today, Autor says, especially with the rise of artificial intelligence.

Most-cited papers — excluding economics research

When economics studies are excluded, the research papers that policy documents most commonly reference cover topics including climate change and nutrition.

Walter Willett, an epidemiologist and food scientist at the Harvard T.H. Chan School of Public Health in Boston, Massachusetts, thinks that interdisciplinary teams are most likely to gain a lot of policy citations. He co-authored a paper on the list of most cited non-economics studies: a 2019 work 3 that was part of a Lancet commission to investigate how to feed the global population a healthy and environmentally sustainable diet by 2050 and has accumulated more than 600 policy citations.

“I think it had an impact because it was clearly a multidisciplinary effort,” says Willett. The work was co-authored by 37 scientists from 17 countries. The team included researchers from disciplines including food science, health metrics, climate change, ecology and evolution and bioethics. “None of us could have done this on our own. It really did require working with people outside our fields.”

Sverker Sörlin, an environmental historian at the KTH Royal Institute of Technology in Stockholm, agrees that papers with a diverse set of authors often attract more policy citations. “It’s the combined effect that is often the key to getting more influence,” he says.

Has your research influenced policy? Use this free tool to check

Sörlin co-authored two papers in the list of top ten non-economics papers. One of those is a 2015 Science paper 4 on planetary boundaries — a concept defining the environmental limits in which humanity can develop and thrive — which has attracted more than 750 policy citations. Sörlin thinks one reason it has been popular is that it’s a sequel to a 2009 Nature paper 5 he co-authored on the same topic, which has been cited by policy documents 575 times.

Although policy citations don’t necessarily imply influence, Willett has seen evidence that his paper is prompting changes in policy. He points to Denmark as an example, noting that the nation is reformatting its dietary guidelines in line with the study’s recommendations. “I certainly can’t say that this document is the only thing that’s changing their guidelines,” he says. But “this gave it the support and credibility that allowed them to go forward”.

Broad brush

Peter Gluckman, who was the chief science adviser to the prime minister of New Zealand between 2009 and 2018, is not surprised by the lists. He expects policymakers to refer to broad-brush papers rather than those reporting on incremental advances in a field.

Gluckman, a paediatrician and biomedical scientist at the University of Auckland in New Zealand, notes that it’s important to consider the context in which papers are being cited, because studies reporting controversial findings sometimes attract many citations. He also warns that the list is probably not comprehensive: many policy papers are not easily accessible to tools such as Overton, which uses text mining to compile data, and so will not be included in the database.

The top 100 papers

“The thing that worries me most is the age of the papers that are involved,” Gluckman says. “Does that tell us something about just the way the analysis is done or that relatively few papers get heavily used in policymaking?”

Gluckman says it’s strange that some recent work on climate change, food security, social cohesion and similar areas hasn’t made it to the non-economics list. “Maybe it’s just because they’re not being referred to,” he says, or perhaps that work is cited, in turn, in the broad-scope papers that are most heavily referenced in policy documents.

As for Sage Policy Profiles, Gluckman says it’s always useful to get an idea of which studies are attracting attention from policymakers, but he notes that studies often take years to influence policy. “Yet the average academic is trying to make a claim here and now that their current work is having an impact,” he adds. “So there’s a disconnect there.”

Willett thinks policy citations are probably more important than scholarly citations in other papers. “In the end, we don’t want this to just sit on an academic shelf.”

doi: https://doi.org/10.1038/d41586-024-00660-1

Autor, D. H., Levy, F. & Murnane, R. J. Q. J. Econ. 118 , 1279–1333 (2003).

Article   Google Scholar  

Costanza, R. et al. Nature 387 , 253–260 (1997).

Willett, W. et al. Lancet 393 , 447–492 (2019).

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Steffen, W. et al. Science 347 , 1259855 (2015).

Rockström, J. et al. Nature 461 , 472–475 (2009).

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Who owns businesses in California? A lawmaker wants the public to know

SACRAMENTO, Calif. — A California lawmaker wants to require business owners and landlords to disclose their identities under legislation aimed at cracking down on opaque ownership structures that have enabled some companies to skirt state laws without facing consequences.

Limited liability companies and similar corporations in the United States are often formed to protect a business owner’s personal assets. In California, the world’s fifth largest economy, such businesses are already required to register with the Secretary of State and share information including the name of the business, its address and the names of its executives or representatives.

But Democratic state Sen. Maria Elana Durazo said that that’s not enough. She also wants the public to know who actually owns the company. Her bill would require these companies to list anyone who owns at least 25% of the company’s assets on its registration with the state. It would apply to all LLCs and similar corporations regardless of the size.

Durazo said the lack of that crucial information has allowed people to set up business structures where one company is owned in the name of another, all to shield their identities from the public, government officials and even law enforcement agencies. In many cases, local and state officials must spend significant time and resources to track down the owners before they can charge or sue the business for violating state laws, if they can find them at all.

“Some owners can abuse LLC to shield not only their assets but also their identities,” Durazo said at a hearing Wednesday. “This is a good governance bill.”

With support from labor, housing and environmental groups, her bill passed a key legislative committee Wednesday. There was no debate. It needs a second committee vote before reaching the Senate floor.

A similar proposal last year did not survive the Legislature’s suspense file, a mysterious process where lawmakers decide — with no explanation — whether bills should move forward or not.

The legislation faces fierce opposition from a number of business groups including those that represent landlords. They argue that LLCs must already share lots of information with the government and note that they will be required to disclose ownership to a branch of the U.S. Treasury Department by 2025.

They also point to costs. Last year, the Secretary of State estimated the new disclosure requirement would cost $9 million to implement and an additional $3.4 million annually in subsequent years to employ 28 support workers.

“It really doesn’t make any sense to us.” said Debra Carlton, an executive of California Apartment Association. “Why add these costs onto the state,” she asked, “when we’re already having financial challenges?”

The practice of operating business anonymously is prevalent in many California industries, proponents of the bill said. In Oakland, after city officials condemned a dilapidated building rented out to low-income immigrant families, the city attorney’s office spent more than a year investigating and combing through hundreds of city code enforcement records to find the owners of the building, said Suzie Dershowitz, who worked on the case at the time. The city eventually found and successfully sued the landlords, who owned more than 130 properties in the city through a network of LLCs and corporations. The investigation would have had taken half a day of work if Durazo’s bill was law at the time, she added.

“As a government agency, I had access to a lot of information,” said Dershowitz, who now works for Public Advocates, an advocacy group sponsoring the bill. “But the lack of transparency in corporate ownership really hampered our investigation.”

Some employers also rely on the practice to dodge labor violations and cheat workers out of their pay, labor attorney Ruth Silver-Taube said. She pointed to a case in San Jose where a hotel worker was fired from his job for filing a wage theft claim with the state. The state couldn’t track down the business owners and had to name 14 different companies, some of which were defunct, in its lawsuit before the owners agreed to settle, she said. The agreement came nine years after the worker filed the initial complaint.

“Justice delayed is justice denied,” Silver-Taube said.

By hiding behind an anonymous LLC, Silicon Valley billionaires were successful in shielding their identities in a secretive $800 million land-buying spree in rural Northern California, despite years of local scrutiny.

Others managed to dodge legal ramifications and responsibilities altogether through the practice, said Haley Ehlers of climate watchdog organization Climate First: Replacing Oil & Gas. The group has spent years advocating for the removal of orphan and idle wells left behind by defunct oil operations. Orphan wells are often be sold to private, anonymous shell companies designed to go bankrupt to help owners of oil businesses evade legal responsibility to clean up the site, leaving taxpayers to shoulder the cost, she said.

“If we had more owner transparency, bad actors wouldn’t be able to hide behind a new shell company name,” Ehlers said.

The federal reporting requirement was passed by Congress in 2021. The legislation requires businesses to report owners to an agency called the Financial Crimes Enforcement Network, which aims to cut down on shell corporations and money laundering. But currently, only law enforcement and government officials — not the public — have access to the information.

A federal court ruled that the law is unconstitutional and exempted more than 65,000 members of a small business association in Alabama. The Justice Department is now appealing the ruling.

New York last December also passed a proposal mirroring the federal legislation to require the disclosure of owners, but the information is only available to some government and law enforcement agencies.

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Research: Boards Still Have an ESG Expertise Gap — But They’re Improving

• Tensie Whelan

Over the last five years, the percentage of Fortune 100 board members possessing relevant credentials rose from 29% to 43%.

The role of U.S. public boards in managing environmental, social, and governance (ESG) issues has significantly evolved over the past five years. Initially, boards were largely unprepared to handle materially financial ESG topics, lacking the necessary background and credentials. However, recent developments show a positive shift, with the percentage of Fortune 100 board members possessing relevant ESG credentials rising from 29% to 43%. This increase is primarily in environmental and governance credentials, while social credentials have seen less growth. Despite this progress, major gaps remain, particularly in climate change and worker welfare expertise. Notably, the creation of dedicated ESG/sustainability committees has surged, promoting better oversight of sustainability issues. This shift is crucial as companies increasingly face both regulatory pressures and strategic opportunities in transitioning to a low carbon economy.

Knowing the right questions to ask management on material environmental, social, and governance issues has become an important part of a board’s role. Five years ago, our research at NYU Stern Center for Sustainable Business found U.S. public boards were not fit for this purpose — very few had the background and credentials necessary to provide oversight of  ESG topics such as climate, employee welfare, financial hygiene, and cybersecurity. Today, we find that while boards are still woefully underprepared in certain areas, there has been some important progress .

• TW Tensie Whelan is a clinical professor of business and society and the director of the NYU Stern Center for Sustainable Business, and she sits on the advisory boards of Arabesque and Inherent Group.

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Who owns businesses in California? A lawmaker wants the public to know

FILE - State Sen. Maria Elena Durazo, D-Los Angeles, addresses a gathering in Sacramento, Calif., May 20, 2019. This year, Durazo, has introduced a bill to require business owners and landlords to disclose their identities under legislation aimed at cracking down on opaque ownership structures that have enabled some companies to skirt state laws without facing consequences. (AP Photo/Rich Pedroncelli, File)

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SACRAMENTO, Calif. (AP) — A California lawmaker wants to require business owners and landlords to disclose their identities under legislation aimed at cracking down on opaque ownership structures that have enabled some companies to skirt state laws without facing consequences.

Limited liability companies and similar corporations in the United States are often formed to protect a business owner’s personal assets. In California, the world’s fifth largest economy, such businesses are already required to register with the Secretary of State and share information including the name of the business, its address and the names of its executives or representatives.

But Democratic state Sen. Maria Elana Durazo said that that’s not enough. She also wants the public to know who actually owns the company. Her bill would require these companies to list anyone who owns at least 25% of the company’s assets on its registration with the state. It would apply to all LLCs and similar corporations regardless of the size.

Durazo said the lack of that crucial information has allowed people to set up business structures where one company is owned in the name of another, all to shield their identities from the public, government officials and even law enforcement agencies. In many cases, local and state officials must spend significant time and resources to track down the owners before they can charge or sue the business for violating state laws, if they can find them at all.

“Some owners can abuse LLC to shield not only their assets but also their identities,” Durazo said at a hearing Wednesday. “This is a good governance bill.”

With support from labor, housing and environmental groups, her bill passed a key legislative committee Wednesday. There was no debate. It needs a second committee vote before reaching the Senate floor.

A similar proposal last year did not survive the Legislature’s suspense file, a mysterious process where lawmakers decide — with no explanation — whether bills should move forward or not.

The legislation faces fierce opposition from a number of business groups including those that represent landlords. They argue that LLCs must already share lots of information with the government and note that they will be required to disclose ownership to a branch of the U.S. Treasury Department by 2025.

They also point to costs. Last year, the Secretary of State estimated the new disclosure requirement would cost $9 million to implement and an additional $3.4 million annually in subsequent years to employ 28 support workers.

“It really doesn’t make any sense to us.” said Debra Carlton, an executive of California Apartment Association. “Why add these costs onto the state,” she asked, “when we’re already having financial challenges?”

The practice of operating business anonymously is prevalent in many California industries, proponents of the bill said. In Oakland, after city officials condemned a dilapidated building rented out to low-income immigrant families, the city attorney’s office spent more than a year investigating and combing through hundreds of city code enforcement records to find the owners of the building, said Suzie Dershowitz, who worked on the case at the time. The city eventually found and successfully sued the landlords, who owned more than 130 properties in the city through a network of LLCs and corporations. The investigation would have had taken half a day of work if Durazo’s bill was law at the time, she added.

“As a government agency, I had access to a lot of information,” said Dershowitz, who now works for Public Advocates, an advocacy group sponsoring the bill. “But the lack of transparency in corporate ownership really hampered our investigation.”

Some employers also rely on the practice to dodge labor violations and cheat workers out of their pay, labor attorney Ruth Silver-Taube said. She pointed to a case in San Jose where a hotel worker was fired from his job for filing a wage theft claim with the state. The state couldn’t track down the business owners and had to name 14 different companies, some of which were defunct, in its lawsuit before the owners agreed to settle, she said. The agreement came nine years after the worker filed the initial complaint.

“Justice delayed is justice denied,” Silver-Taube said.

By hiding behind an anonymous LLC, Silicon Valley billionaires were successful in shielding their identities in a secretive $800 million land-buying spree in rural Northern California, despite years of local scrutiny.

Others managed to dodge legal ramifications and responsibilities altogether through the practice, said Haley Ehlers of climate watchdog organization Climate First: Replacing Oil & Gas. The group has spent years advocating for the removal of orphan and idle wells left behind by defunct oil operations. Orphan wells are often be sold to private, anonymous shell companies designed to go bankrupt to help owners of oil businesses evade legal responsibility to clean up the site, leaving taxpayers to shoulder the cost, she said.

“If we had more owner transparency, bad actors wouldn’t be able to hide behind a new shell company name,” Ehlers said.

The federal reporting requirement was passed by Congress in 2021. The legislation requires businesses to report owners to an agency called the Financial Crimes Enforcement Network, which aims to cut down on shell corporations and money laundering. But currently, only law enforcement and government officials — not the public — have access to the information.

A federal court ruled that the law is unconstitutional and exempted more than 65,000 members of a small business association in Alabama. The Justice Department is now appealing the ruling.

New York last December also passed a proposal mirroring the federal legislation to require the disclosure of owners, but the information is only available to some government and law enforcement agencies.

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White-sounding names get called back for jobs more than Black ones, a new study finds

Joe Hernandez

A sign seeking job applicants is seen in the window of a restaurant in Miami, Florida, on May 5, 2023. Joe Raedle/Getty Images hide caption

A sign seeking job applicants is seen in the window of a restaurant in Miami, Florida, on May 5, 2023.

Twenty years ago, two economists responded to a slew of help-wanted ads in Boston and Chicago newspapers using a set of fictitious names to test for racial bias in the job market.

The watershed study found that applicants with names suggesting they were white got 50% more callbacks from employers than those whose names indicated they were Black.

Researchers at the University of California, Berkeley and the University of Chicago recently took that premise and expanded on it, filing 83,000 fake job applications for 11,000 entry-level positions at a variety of Fortune 500 companies.

Their working paper , published this month and titled "A Discrimination Report Card," found that the typical employer called back the presumably white applicants around 9% more than Black ones. That number rose to roughly 24% for the worst offenders.

The research team initially conducted its experiment in 2021, but their new paper names the 97 companies they included in the study and assigns them grades representing their level of bias, thanks to a new methodology the researchers developed.

"Putting the names out there in the public domain is to move away from a lot of the performative allyship that you see with these companies, saying, 'Oh, we value inclusivity and diversity,'" said Pat Kline, a University of California, Berkeley economics professor who worked on the study. "We're trying to create kind of an objective ground truth here."

America Reckons With Racial Injustice

From jobs to homeownership, protests put spotlight on racial economic divide.

The names that researchers tested include some used in the 2004 study as well as others culled from a database of speeding tickets in North Carolina. A name was classified as "racially distinctive" if more than 90% of people with that name shared the same race.

Applicants with names such as Brad and Greg were up against Darnell and Lamar. Amanda and Kristen competed for jobs with Ebony and Latoya.

What the researchers found was that some firms called back Black applicants considerably less, while race played little to no factor in the hiring processes at other firms.

Dorianne St Fleur, a career coach and workplace consultant, said she wasn't surprised by the findings showing fewer callbacks for presumed Black applicants at some companies.

"I know the study focused on entry-level positions. Unfortunately it doesn't stop there. I've seen it throughout the organization all the way up into the C-suite," she said.

St Fleur, who primarily coaches women of color, said many of her clients have the right credentials and experience for certain jobs but aren't being hired.

"They are sending out dozens, hundreds of resumes and receiving nothing back," she said.

What the researchers found

Much of a company's bias in hiring could be explained by its industry, the study found. Auto dealers and retailers of car parts were the least likely to call back Black applicants, with Genuine Auto Parts (which distributes NAPA products) and the used car retailer AutoNation scoring the worst on the study's "discrimination report card."

"We are always evaluating our practices to ensure inclusivity and break down barriers, and we will continue to do so," Heather Ross, vice president of strategic communications at Genuine Parts Company, said in an email.

AutoNation did not reply to a request for comment.

The companies that performed best in the analysis included Charter/Spectrum, Dr. Pepper, Kroger and Avis-Budget.

Workplace Diversity Goes Far Past Hiring. How Leaders Can Support Employees Of Color

Several patterns emerged when the researchers looked at the companies that had the lowest "contact gap" between white and Black applicants

Federal contractors and more profitable companies called back applicants from the two racial groups at more similar rates. Firms with more centralized human resources departments and policies also exhibited less racial bias, which Kline says may indicate that a standardized hiring workflow involving multiple employees could help reduce discrimination.

When it came to the sex of applicants, most companies didn't discriminate when calling back job-seekers.

Still, some firms preferred one sex over another in screening applicants. Manufacturing companies called back people with male names at higher rates, and clothing stores showing a bias toward female applicants.

What can workplaces — and workers — do

Kline said the research team hoped the public would focus as much on companies doing a bad job as those doing a good one, since they have potentially found ways to remove or limit racial bias from the hiring process.

"Even if it's true, from these insights in psychology and behavioral economics, that individuals are inevitably going to carry biases along with them, it's not automatic that those individual biases will translate into organizational biases, on average," he said.

St Fleur said there are several strategies companies can use to cut down on bias in the hiring process, including training staff and involving multiple recruiters in callback decisions.

Companies should also collect data about which candidates make it through the hiring process and consider standardizing or anonymizing that process, she added.

St Fleur also said she often tells her job-seeking clients that it's not their fault that they aren't getting called back for open positions they believe they're qualified for.

"The fact that you're not getting callbacks does not mean you suck, you're not a good worker, you don't deserve this thing," she said. "It's just the nature of the systemic forces at play, and this is what we have to deal with."

Still, she said job candidates facing bias in the hiring process can lean on their network for new opportunities, prioritize inclusive companies when applying for work and even consider switching industries or locations.

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Private Companies

Public companies, key differences, the bottom line.

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• Corporate Finance Basics

Private vs. Public Company: What's the Difference?

Private vs. Public Company: An Overview

A private company is a company held in private hands. This means that, in most cases, a company is owned by its founders, management, and/or a group of private investors. The public isn't privy to its business.

A public company is a company that has sold a portion of itself to the public via an initial public offering (IPO) , meaning shareholders have a claim to part of the company's assets and profits. Public disclosure of business and financial activities and performance is required of public companies.

Both private and public companies can contribute to the financial health and well-being of economies and nations through their business activities, employment opportunities, and wealth building.

Read on to learn more about a private vs. public company and the differences between them.

Key Takeaways

• A private company usually is owned by its founders, management, and/or a group of private investors.
• Information about its operations and financial performance is not available to the public.
• A public company has sold a portion of itself to the public via an initial public offering.
• After the IPO, a public company usually trades on a public stock exchange.
• The main advantage public companies have over private companies is their ability to tap the financial markets for capital, by selling stock (equity) or bonds (debt).

A popular misconception is that privately-held companies are small and of little interest. In fact, many big-name companies are privately held. Take Mars, Cargill, Fidelity Investments, Koch Industries, and Bloomberg, for example.

Private companies are owned by those who establish them and those invited to invest in them. The public-at-large cannot buy shares or otherwise invest in private companies at their own discretion.

Because they're not owned by the public, private companies' executives/management don't have to answer to stockholders or provide any company information to the public. And they aren't required to file disclosure statements with the Securities and Exchange Commission (SEC) .

Capital for Growth

A private company can't use public capital markets to raise funds when it needs them. It must turn to private funding. That means private companies fund their growth with profits from operations and/or by borrowing money from banks, venture capitalists, or other types of investors.

Importantly, while a privately-held company can’t rely on getting cash by selling stocks or bonds in public markets, it may still be able to sell a limited number of shares without registering with the SEC, under Regulation D. In this way, private companies can use shares of equity to attract investors.

It has been said that private companies seek to minimize the tax bite, while public companies seek to increase profits for shareholders.

A public company is usually a very large business entity and is normally listed and traded on a public exchange. To continue trading publicly, exchanges require public companies to meet certain standards. For example, the New York Stock Exchange requires that public company maintain a market capitalization of $15 million.

Once a public company's stock shares trade on public stock markets, they can be bought and sold by people outside of the company. So, the company is owned by those within the organization who possess shares of company stock and by members of the general public. As a consequence, members of the public who own shares have a stake in the company and company management can be influenced by their opinions related to the company's business.

Public Disclosure

In addition, a public company is required to disclose certain business and financial information regularly to the public. This information reaches the public as annual reports, quarterly reports, and current reports (such as 10-K, 10-Q, and 8-K) that are filed with the SEC .

A main advantage publicly traded companies have is their ability to tap the financial markets for needed capital for expansion through mergers and acquisitions, for internal projects that can drive profits and growth, or for other needs.

They do this by selling stock (equity) or bonds (debt).

For example, a public company may issue bonds which investors purchase. In this way, investors make loans to the company. The company will have to repay these loans with interest. But it won’t have to surrender any shares of ownership in the company to the investor.

Thus, bonds can be a good option for public companies seeking to raise money, especially in a depressed stock market. However, a company could also raise capital by selling additional shares. By doing so, it may relieve itself of the burden of repaying bonds.

Company Ownership

Private companies are owned by founders, executive management, and private investors. Public companies are owned by members of the public who purchase company stock as well as personnel within companies (founders, managers, employees) who possess shares of company stock as a result of the IPO and purchases.

Because they are entitled to a say, public company shareholders not involved in the company in any way other than shares ownership can have an impact on the management and operations of public companies.

Source of Capital

Private companies normally obtain needed capital from private sources, such as their shareholding owners or private investors (e.g., venture capitalists). They can also raise funds by getting loans from financial institutions.

Public companies obtain needed capital by selling shares in the public marketplace or by issuing debt. This makes capital easier to get hold of for public companies compared to private companies.

Public companies are required by the SEC to regularly inform shareholders and the public of their financial activities, business activities, and business results by filing periodic reports and other materials with the government.  

Private companies aren't required to make their company information public or register with the SEC (although legislation has been introduced in the U.S. Senate to require some to do so).

News about public companies, unwelcome and not, is reported regularly by the press and other media. Private companies typically don't experience such publicity.

Quick Reference

Normally not subject to SEC regulation

Owned by founders and private investors

Access to capital through owners, investors, and through private loans

Not subject to public scrutiny

Must register with SEC and file regular financial reports

Owned by those inside and outside the company who possess/buy shares

Access to capital through public markets, such as stock and bond markets

As shareholders, members of public can vote and share opinions about company matters (which can also be publicized by media)

Public companies are required to register and file company information with the SEC as part of its mission to protect investors, maintain fair, orderly, and efficient markets, and provide for access to capital by companies and entrepreneurs.

Examples of Private vs. Public Companies

The 10 largest private companies as of 2022, measured by revenue:

• Cargill $165 billion
• Koch Industries $125 billion
• Publix Super Markets $48 billion
• Mars $45 billion
• Pilot Company $41.9 billion
• H-E-B $38.9 billion
• Reyes Holdings $35.3 billion
• C&S Wholesale Grocers $33 billion
• Enterprise Holdings $30 billion
• Love's Travel Stops & Country Stores $25.5 billion

The 10 largest public companies, as of September 2023, measured by market capitalization:

• Apple $2.74 trillion
• Microsoft $2.52 trillion
• Saudi Aramco $2.19 trillion
• Alphabet $1.74 trillion
• Amazon $1.49 trillion
• NVIDIA $1.12 trillion
• Tesla $872 billion
• Berkshire Hathaway $805.85 billion
• Meta Platforms $799.71 billion
• Eli Lilly $567.41 billion

Why Do Private Companies Go Public?

They may go public because they want or need to raise capital and to establish a source of future capital.

Can a Public Company Become Private?

Yes, as long as a shareholder vote supports such an action. Normally, the company has to buy back (or own already) enough of its shares to control the voting for this move.

Which Is More Transparent, A Private or Public Company?

Both can be transparent about what they do, their financial performance, and business results. However, a public company is required to provide a wealth of information about itself to the SEC, and in turn, the public-at-large, on a regular basis. A private company need only be transparent to its private owners.

Private and public companies can contribute to the economic health and financial well-being of their communities, states, and nations. But while both types of companies, broadly, operate businesses to earn revenue and make profits, they differ in ownership, public disclosure needs, government oversight, and access to capital.

Investor.gov. " Public Companies ."

Forbes. " America's Largest Private Companies ."

U.S. Securities and Exchange Commission. " Investor Bulletin: Private Placements Under Regulation D ."

New York Stock Exchange. " NYSE MKT CONTINUED LISTING STANDARDS ."

Congress.gov. " S.4857 - Private Markets Transparency and Accountability Act ."

U.S. Securities and Exchange Commission. " Mission ."

CompaniesMarketCap. " Largest Companies by Market Cap ."

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Rating Action Commentary

Fitch Affirms Jinan City Construction Group at 'BBB+'; Outlook Stable

Thu 18 Apr, 2024 - 5:36 AM ET

Fitch Ratings - Hong Kong/Beijing - 18 Apr 2024: Fitch Ratings has affirmed Jinan City Construction Group Limited Company's (JCCG) Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDRs) of 'BBB+'. The Outlook is Stable.

Fitch has also affirmed JCCG's USD305 million 2.4% and USD500 million 2.3% senior unsecured bonds due September 2026 and November 2024, respectively, at 'BBB+'. The bonds were issued by Jinan Urban Construction International Investment Co., Limited, JCCG's indirect, partially owned subsidiary. JCCG provides an unconditional and irrevocable guarantee to the notes, which rank equally with its other present and future unsecured and unsubordinated obligations.

We regard JCCG to be a government-related entity (GRE) of China's Jinan municipality. The company is majority owned by the Jinan State-Owned Assets Supervision and Administration Commission. Its ratings reflect our expectation that it will receive extraordinary support from the municipal government if needed.

KEY RATING DRIVERS

Support Score Assessment 'Extremely likely'

We believe the Jinan government would be 'Extremely Likely' to extend extraordinary support to JCCG should it be needed. This reflects the support score of 35 out of a maximum of 60 under our Government-Related Entities Rating Criteria, which is based on our assessment for the government's responsibility and incentive to provide support.

Responsibility to Support

Decision Making and Oversight 'Very Strong'

JCCG is 91.85% owned by the Jinan State-Owned Assets Supervision and Administration Commission. The municipal government makes key decisions for JCCG, including board appointments. It also approves its major events, like M&A, disposals, strategic development, long-term plans, annual budgets, major capital expenditure and funding plans. JCCG reports all major strategic decisions to the government. It reports its financial performance as well as investment and financing activities to the government monthly.

Precedents of Support 'Strong'

The Jinan government has provided significant financial support to the company. JCCG received capital injections of CNY10 million in 2022 and CNY120 million in 2023, and special government bonds of CNY6.4 billion in 2022 and CNY7.2 billion in 2023 to support project investments. JCCG is responsible for primary land development within Jinan and is entitled to most of the land sale profits, in addition to recognised development costs. The company received CNY2.1 billion and CNY2.4 billion in land sale revenue refunds in 2022 and 2023, respectively.

Incentives to Support

Preservation of Government Policy Role 'Strong'

JCCG is a high-profile GRE in Jinan municipality that is mandated to provide public services, including infrastructure construction and primary land development. We believe its default could disrupt the provision of these services. The company relies on continued access to debt funding to make progress in the projects and its default could constrain lending and refinancing of its projects.

Contagion Risk 'Strong'

The public perceives JCCG as a high-profile and systemically important entity under Jinan municipality, considering the company's status and position as the city's largest GRE by assets and debt. JCCG had outstanding total debt equivalent to around 0.6x of government debt that was on-lent from the Shandong provincial government as at end-2023. We believe JCCG's default would impair the credibility of the Jinan government and disrupt access to financing for the city's remaining GREs.

Standalone Credit Profile

We assess the Standalone Credit Profile (SCP) of JCCG at 'b', with a 'Midrange' risk profile, 'b' financial profile and middle positioning among peers with the same SCP.

Risk Profile: 'Midrange'

Our risk profile assessment reflecting a 'Midrange' assessment for revenue risk, expenditure risk and liabilities and liquidity risk.

Revenue Risk: 'Midrange'

Most of JCCG's revenue is from land development and urban infrastructure construction, which can fluctuate depending on the local government's plans, policies and the local economy. However, Jinan's strong economic growth offsets the high customer concentration in the municipality. The company also has a significant market position specialising in urban development, construction and primary land development, supporting its bargaining position on key revenue contracts.

Expenditure Risk: 'Midrange'

The company's cost drivers are stable with adequate operating resources. We expect moderate volatility in expenditure based on a diversified project and contractor portfolio. JCCG's costs are allocated across various business segments, which have all delivered positive gross margins for the past three years, averaging at 14%. Strong bargaining power in the local market also helps manage the risk.

Liabilities and Liquidity Risk: 'Midrange'

The company has diversified financing channels; as of end-2023, 26% of its debt was due to mature by end-2024. We do not foresee any imminent liquidity risk, as JCCG has satisfactory access to capital markets. There is limited exposure to foreign-exchange risk, as over 97% of debt is denominated in Chinese yuan. JCCG provided CNY5.1 billion in external guarantees on a consolidated basis at end-2023, equivalent to 5% of its net assets.

Financial Profile 'b'

The financial profile assessment reflects JCCG's high leverage, calculated as net debt/Fitch-calculated EBITDA, of around 45x in 2027 under our rating case. This is positioned in the middle of 'b' SCP peers. Actual leverage was 48.7x in 2021 and 54.1x in 2022. Secondary metrics indicate a 'b' debt-service coverage ratio, 'b' gross interest coverage ratio and 'bbb' liquidity coverage ratio.

Derivation Summary

JCCG is rated under our GRE Rating Criteria, reflecting our assessments of the Jinan government's decision-making and oversight, support precedents and incentives to extend support. We believe it is extremely likely that the Jinan government will step in to support the company, if needed. The ratings also take into consideration the SCP assessment of 'b' under our Public Policy Revenue-Supported Entities Rating Criteria.

Issuer Profile

JCCG, established in 2017 under a mandate by the Jinan government, is majority owned and fully controlled by the municipality. It carries out primary land development and urban infrastructure construction. The local government has appointed JCCG as its major urban-development platform.

Rating Sensitivities

Factors that could, individually or collectively, lead to negative rating action/downgrade.

- A lowering of Fitch's credit view of Jinan municipality's ability to provide support or other legitimate resources allowed under China's policies and regulations.

- A lower likelihood of government support due to our reassessment of the government's responsibility and incentive to provide support.

Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade

- Improvement in Fitch's internal assessment of Jinan municipality's ability to provide support or other legitimate resources allowed under China's policies and regulations.

- A higher likelihood of government support, due to our reassessment of the government's responsibility to and incentive to provide support.

ESG Considerations

The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Fitch's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. For more information on Fitch's ESG Relevance Scores, visit www.fitchratings.com/topics/esg/products#esg-relevance-scores

References for Substantially Material Source Cited as Key Driver Rating

The principal sources of information used in the analysis are described in the Applicable Criteria.

• senior unsecured

VIEW ADDITIONAL RATING DETAILS

Additional information is available on www.fitchratings.com

PARTICIPATION STATUS

The rated entity (and/or its agents) or, in the case of structured finance, one or more of the transaction parties participated in the rating process except that the following issuer(s), if any, did not participate in the rating process, or provide additional information, beyond the issuer’s available public disclosure.

APPLICABLE CRITERIA

• Government-Related Entities Rating Criteria (pub. 12 Jan 2024)
• Public Policy Revenue-Supported Entities Rating Criteria (pub. 12 Jan 2024) (including rating assumption sensitivity)

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Americans Supportive but Misinformed About Fusion Energy's Promise

Americans Supportive but Misinformed About Fusion Energy's Promise

Pioneering social sciences research indicates regulators must address public confusion and desire for safety to expand fusion energy support..

NORMAN, OKLA. – Research led by  Hank Jenkins-Smith , Ph.D., director of the Institute for Public Policy Research and Analysis at the University of Oklahoma, explores American adults’ perceptions of fusion energy. This first-of-its-kind study reveals broad public support from respondents, but their limited knowledge of the technology and frequent misconceptions could pose a challenge to those seeking to develop fusion energy in the U.S. 

“Our research questions public perceptions of nuclear fission and whether these opinions could affect the potential for fusion energy to become a major power source for the U.S. electrical grid,” he said. “It turns out that these social perspectives are significant and must be addressed by engineers, physicists and regulatory specialists for this technology to be widely adopted.” 

Fission energy, or the splitting of atoms, differs from fusion energy, which combines two atoms under extreme heat and pressure. According to the International Atomic Energy Agency, the fusion process is intrinsically safe. It offers an abundant source of energy with very little greenhouse gas emissions or long-living radioactive waste. The same cannot be said for fission energy. 

“We discovered that less than half of all respondents had heard of fusion energy, and many confused fission and fusion,” he said. “This confusion, along with pop cultural references of Godzilla or Homer Simpson and memories of spectacular accidents, like those at Three Mile Island, Chernobyl or Fukushima, cause them to believe that fusion technology is extraordinarily risky.” 

Based on their research findings, Jenkins-Smith’s team determined that the public wants decision-makers to think carefully about the safety constraints and future incentives for fusion energy in America.

“The fusion industry should look at how the fission industry has developed an amazing safety culture. They’ve built in many layers and processes to reduce the possibility of accidents,” he said. “These are things that fusion regulators must develop ahead of time rather than waiting for a disaster to strike and fixing the problem later.”

According to Jenkins-Smith, messaging is an important takeaway from this research. He believes there are potential opportunities for misleading statements, leveraged by fusion opponents, to confuse and scare Americans and to undermine public trust for information from technology supporters.

“Because the public is not well-informed, opponents could fairly easily generate false narratives linking fission to fusion and thereby poisoning public acceptance of fusion moving forward,” he said. “To combat this, developers, regulators and advocacy groups must be aware of and careful about what they say about fusion energy. They must have humility and avoid making overly optimistic claims that will be difficult or impossible to achieve. Doing so will go a long way in retaining societal acceptance of this technology.”

Study respondents currently express high trust for regulators and operators of prospective fusion energy facilities. These positive views of fusion are based, in part, on technological optimism.

“Americans have a propensity to believe that new technologies can help improve their lives. We’re technological optimists,” he said. "The more technologically optimistic someone is, the more likely they are to support fusion energy. Harnessing this optimism could help grow our economy, tackle climate change and address international security and energy concerns.”

The researchers at OU’s Institute for Public Policy Research and Analysis study many wicked challenges society faces. Learn more about their energy and the environment research and read the full study, “Americans’ Views of Fusion Energy: Implications for Sustainable Public Support,” published in Fusion Science and Technology , DOI no. 10.1080/15361055.2024.2328457 .

About the project

This research was a collaboration between Jenkins-Smith and IPPRA Associate Director for Energy and Nuclear Projects Kuhika Gupta, Ph.D., IPPRA Deputy Director for Research Joseph Ripberger, Ph.D., OU Senior Associate Vice President for Research and Partnerships Carol Silva, Ph.D., research scientist Andrew Fox, Ph.D., and graduate research assistant Will Livingston. Jenkins-Smith is also a George Lynn Cross Professor of political science in the OU Dodge Family College of Arts and Sciences. Photo courtesy Sean Ernst, Ph.D.

About the University of Oklahoma

Founded in 1890, the University of Oklahoma is a public research university located in Norman, Oklahoma. As the state’s flagship university, OU serves the educational, cultural, economic and health care needs of the state, region and nation. OU was named the state’s highest-ranking university in  U.S. News & World Report’s  most recent Best Colleges list .  For more information about the university, visit  ou.edu .

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Top Wealth Group Holding Limited Announces Pricing of Initial Public Offering

Hong Kong, April 16, 2024 (GLOBE NEWSWIRE) -- Top Wealth Group Holding Limited (the “Company” or “Top Wealth”), a Hong Kong-based supplier of luxury caviar products, today announced the pricing of its initial public offering (the “Offering”) of 2,000,000 ordinary shares at a public offering price of US$4.00 per ordinary share. The ordinary shares have been approved for listing on the Nasdaq Capital Market and are expected to commence trading on April 16, 2024, U.S. Eastern time, under the ticker symbol “TWG.”

The Company expects to receive aggregate gross proceeds of US$8 million from the Offering, before deducting underwriting discounts and other related expenses. In addition, the Company has granted the underwriters a 45-day option to purchase up to an additional 300,000 ordinary shares at the public offering price after the closing of the Offering, less underwriting discounts. The Offering is expected to close on or about April 18, 2024, subject to the satisfaction of customary closing conditions.

Proceeds from the Offering will be used for expanding the Company’s business internationally, brand promotion and marketing, and general working capital.

The Offering is being conducted on a firm commitment basis. Revere Securities LLC is acting as the sole underwriter for the Offering. Ortoli Rosenstadt LLP is acting as the U.S. counsel to the Company, and The Crone Law Group P.C. is acting as U.S. counsel to Revere Securities LLC in connection with the Offering.

A registration statement on Form F-1 relating to the Offering was filed with the U.S. Securities and Exchange Commission (the “SEC”) (File Number: 333-275684) and was declared effective by the SEC on March 29, 2024. The Offering is being made only by means of a prospectus, forming a part of the registration statement, and a free writing prospectus. Copies of the final prospectus relating to the Offering, when available, may be obtained from Revere Securities LLC by email at [email protected], by standard mail to Revere Securities LLC, 650 Fifth Avenue, 35th Floor, New York, NY 10019 USA, or by telephone at (212) 688-2238. In addition, copies of the prospectus and free writing prospectus relating to the Offering may be obtained via the SEC’s website at www.sec.gov.

Before you invest, you should read the prospectus, the free writing prospectus, and other documents the Company has filed or will file with the SEC for more information about the Company and the Offering. This press release does not constitute an offer to sell, or the solicitation of an offer to buy any of the Company’s securities, nor shall there be any offer, solicitation or sale of any of the Company’s securities in any state or jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of such state or jurisdiction.

About Top Wealth Group Holding Limited

Top Wealth Group Holding Limited is a holding company incorporated in the Cayman Islands, and all of its operations are carried out by its operating subsidiary in Hong Kong, Top Wealth Group (International) Limited. The Company specializes in supplying premium-class sturgeon caviar, and its caviar and caviar products are endorsed with the Convention on International Trade in Endangered Species of Wild Fauna and Flora (“CITES”) permits. The Company supplies caviar to its customers under its customer’s brand labels (i.e. private labeling), and the Company also sells the caviar product under the Company’s caviar brand, “Imperial Cristal Caviar”, which has continuously achieved tremendous sales growth since its launch in the market.

Forward-Looking Statements

Certain statements in this announcement are forward-looking statements, including, but not limited to, the Company’s proposed Offering. These forward-looking statements involve known and unknown risks and uncertainties and are based on the Company’s current expectations and projections about future events that the Company believes may affect its financial condition, results of operations, business strategy and financial needs, including the expectation that the Offering will be successfully completed. Investors can find many (but not all) of these statements by the use of words such as “approximates,” “believes,” “hopes,” “expects,” “anticipates,” “estimates,” “projects,” “intends,” “plans,” “will,” “would,” “should,” “could,” “may” or other similar expressions in this prospectus. The Company undertakes no obligation to update or revise publicly any forward-looking statements to reflect subsequent occurring events or circumstances, or changes in its expectations, except as may be required by law. Although the Company believes that the expectations expressed in these forward-looking statements are reasonable, it cannot assure you that such expectations will turn out to be correct, and the Company cautions investors that actual results may differ materially from the anticipated results and encourages investors to review other factors that may affect its future results in the Company’s registration statement and other filings with the SEC.

For more information, please contact:

Top Wealth Group Holding Limited

Investor Relations

Email:   [email protected]

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