When starting a business in Sri Lanka, one key decision is choosing between a Public Limited Company (PLC) and a Private Limited Company (Pvt Ltd). Both structures have their own benefits and legal requirements. Below is a detailed comparison of their main differences, along with the advantages of registering a company in Sri Lanka.
What is a Public Limited Company (PLC)?
A Public Limited Company (PLC) is a business entity that offers its shares to the public and is typically listed on a stock exchange. This structure is ideal for businesses that require large-scale capital investment. Ownership & Shareholding:
- A PLC can offer shares to the public and is usually listed on the stock exchange.
- There is no limit on the number of shareholders, making it easier to raise capital from external investors. Regulatory Requirements:
- Must comply with the Sri Lanka Accounting and Auditing Standards Act, No.15 of 1995.
- Subject to the Securities and Exchange Commission (SEC) Act and listing rules.
- Financial reporting must follow strict disclosure regulations. Capital & Financial Requirements:
- A company must have a minimum stated capital of Rs. 500 million to be listed on the Main Board of the Colombo Stock Exchange (CSE). Liability Protection:
- Shareholders have limited liability, meaning they are only responsible for the amount they have invested. Transparency & Compliance:
- PLCs are required to disclose financial information to shareholders and regulatory bodies.
- Must comply with corporate governance and insider trading regulations.
What is a Private Limited Company (Pvt Ltd)?
A Private Limited Company (Pvt Ltd) is a business entity that is privately owned and cannot offer shares to the public. This structure is suitable for small to medium-sized businesses looking for flexibility and privacy. Ownership & Shareholding:
- A Pvt Ltd company cannot offer shares to the public and is privately owned.
- The number of shareholders is limited to a minimum of one and a maximum of 50. Regulatory Requirements:
- Less regulatory oversight compared to PLCs, making them easier and more cost-effective to manage.
- No requirement to publicly disclose financial statements. Capital & Financial Requirements:
- Funding typically comes from private investments rather than public shareholders. Liability Protection:
- Like PLCs, Pvt Ltd companies also offer limited liability to their shareholders. Transparency & Compliance:
- Less stringent reporting requirements.
- Ownership and decision-making remain within a close group of shareholders.
Advantages of Registering a Company
When you start a business or if you already have an unregistered business, the business’s name automatically becomes the name of the person or entity that owns it. However, if you want to name your company something different, you need to register it. By registering your business, you can:
- Obtain Licenses and Permits: Registration ensures you are legally recognized and can obtain the necessary licenses and permits to operate.
- Register with the Inland Revenue Department and Tax Authorities: This allows your business to comply with tax laws and avoid penalties.
- Access Banking Services: Opening a business bank account is much easier once your business is registered, and you can also access bank facilities for your business needs.
- Establish Brand Identity: A registered business helps you create a distinct brand identity and build credibility in your marketing activities.
Key Differences Between PLCs and Pvt Ltd Companies
Share Offering:
- PLCs can offer shares to the public, while Pvt Ltd companies cannot. Number of Shareholders:
- PLCs have no limit on shareholders, while Pvt Ltd companies are restricted to 50. Regulatory Oversight:
- PLCs must follow stricter financial and corporate governance rules. Capital Requirements:
- PLCs need substantial capital to get listed, whereas Pvt Ltd companies have no minimum capital requirement. Ownership & Control:
- PLCs have dispersed ownership, while Pvt Ltd companies maintain control within a small group.
Which One Should You Choose?
If you are looking to raise significant capital and expand publicly, a Public Limited Company is the right choice, but it comes with stricter regulations. On the other hand, if you prefer to keep ownership within a smaller group while enjoying limited liability, a Private Limited Company is the better option.
At Talentspark Consulting, we can guide you through the business registration process and help you select the best structure for your needs. Contact us today to get started!
