A public limited liability company is defined as one which by its articles allows the public to subscribe for its shares, must have a minimum of seven persons but no maximum number is prescribed, allows the shares to be transferred and the name of the public limited company must end with the abbreviation “plc”.

The word public is used to imply that any member of the public is free to purchase shares in the business when shares are advertised for sale. Public limited companies are actually owned by private individuals and organisations.

Public limited liability companies or joint stock companies are organisations which have separate legal entity. It is regarded in law as having an identity of its own. The shareholders are not personally responsible for anything that is done in the name of the organisation. The shareholders also enjoy limited liability, and above all, it enjoys the advantage of a large number of people who through the purchase of shares become owners of the company.

Examples of public limited liability companies (or joint stock companies) are: Zenith Bank Plc ., Guinness Nig. Plc ., First Bank Plc ., Dunlop Nig. Plc ., UTC Nig. Plc. and Texaco Nig. Plc.



  1. Ownership: The number of shareholders range from seven t infinity, i.e. owners must be at least seven but there is no maximum number.
  2. It is a legal entity: The joint stock company has a distinct personality from that of the owners. It can sue and be sued in its own name.
  3. Perpetual existence: The death or withdrawal of some shareholders will not affect the existence of the company. It enjoys continuous existence.
  4. It has limited liability: The liability of shareholders is limited to the amount contributed to the company. The private properties of the shareholders will not be touched in the event of liquidation.
  5. Formation: A public limited liability company must follow some special formalities before registration. They secure incorporation by filing the article of association and memorandum of association with the registrar of companies.
  6. Preparation of annual accounts: It is required by statute to keep certain prescribed books of account. The accounts must be audited and published annually.
  7. Specific line of business: A public limited liability company is authorised by law to carry on business specified in the object clause.
  8. Ownership separated from management: Ownership is separated from management. The shareholders are regarded as the owners of the company while the management is in the hand of board of directors.



  1. Legal entity: Public limited liability companies have legal existence. They have a distinct personality from the owners, hence they can sue and be sued in their own name.
  2. Perpetual existence: There is continuity in a joint stock company. The death or withdrawal of a shareholder cannot put an end to the business.
  3. Limited liability: Their liability is limited to the amount invested as capital in the business; private properties will not be affected.
  4. Large capital: They can raise enough capital by selling more shares or debentures to the public.
  5. Transferability of shares: Shares of a public limited liability company can easily be transferred without having an effect on the business operation.
  6. Loan facilities: Many banks prefer to grant loans to public limited companies than other forms of business units because there is no likelihood of default in payment.
  7. Economies of large scale production: Public limited liability companies have sufficient capital for expansion, which can lead to mass production of goods.
  8. Democracy in management: In choosing the board of directors, shareholders have the right to vote or be voted for at the annual general meeting.
  9. Owners are separated from management: In joint stock companies, owners are separated from management. The shareholders are regarded as the owners of the company while the management is in the hands of board of directors.
  10. Employees can become co-owners: Employees could become co-owners of the business by purchasing shares in the company.
  11. Recruitment of experts: Joint stock company attracts men of ability and skill to work for it.
  12. Research programmes: In joint stock Company, there is greater opportunity to undertake research programmes.



  1. Lack of privacy: Public limited liability companies lack privacy because they are mandated by law to publish their annual audited accounts to the public. This makes it impossible for them to maintain secrecy or privacy.
  2. Conflict of interest: There is the possibility of conflict of interest among the shareholders, directors and staff, which may affect the efficiency of operations of the business.
  3. Slow decision making: Decisionmaking is slow because of wider consultations and discussions in the management hierarchy.
  4. Separation of owners from control: The owners of the business (shareholders) have little or no say in the affairs of the business, while the people at the helm of affairs who are not the owners may not put in their best.
  5. Hard to establish: The procedures and formalities involved in registration are very hard and complicated.
  6. Payment of large corporate tax: They are saddled with heavy tax burdens, arising from profit declared.
  7. Lack of flexibility: The company can only carry on business provided for it in its object clause in the memorandum of association. It cannot venture into any other type of business.
  8. Decrease in personal interest: The type of interest exhibited in this type of company is usually very low compared with the sole proprietorship where the zeal and interest is very high.
  9. Large capital requirement: The capital required to set up and run a joint stock company is usually very large.



  1. Loans and overdraft: Joint stock company can obtain loans and overdraft from commercial or development banks.
  2. Sales of shares: A joint stock company can also raise capital by issuing shares for public subscription.
  3. Sales of debentures: These are long term loans obtained from the general public at a fixed interest.
  4. Bill of exchange: This is a document duly signed by the debtor’s bank to the creditor and the creditor cashes the money with some discounts.
  5. Equipment leasing: Public limited liability companies can lease out some of their equipment for money.
  6. Retained (plough back) profits: The profits made by the company can be set aside for re-investment.
  7. Trade credit: Raw materials can be purchased by the joint stock company on credit.
  8. Hire purchase: Facilities can be granted to the company to buy and pay by instalments.



A share can be defined as the individual portion of the company’s capital owned by shareholders. It is the interest which a shareholder has in a company. In other words, share is a unit of capital measured by a sum of money. The Company Act defines a share as: “The interest in a company’s share capital of a member who is entitled to share in the income of such company.”


Types of shares

There are two major types of shares. These are Preference shares and Ordinary shares.

1) Preference shares: A preference share is the type of share which has priority in terms of dividend payment and repayment of capital in the event of winding up. They have a fixed rate of dividends.


Features of preference shares

  • Preference shares have no voting rights.
  • They have fixed rates of interest.
  • Holders receive dividends before others.
  • They are entitled to return of capital first at winding up.


Types of preference shares

(a) Cumulative preference shares: Cumulative preference shares have priority in the share of dividends over others. Cumulative preference shares receive arrears of dividends not paid before other shares, i.e. when no profit is declared, their dividends will be carried forward to the following year.


Features of cumulative preference shares

  • No voting rights.
  • It has a fixed rate of dividend.
  • They receive arrears of dividend.


(b) Participating preference shares: Participating preference shares are shares which are entitled to further percentage of dividends after the ordinary shares have received a specified percentage of profits. Participating preference shares have the right to participate equally with the ordinary shareholders in surplus dividends apart from their fixed dividends.


Features of participating preference shares

  • They receive fixed rate of dividends like other preference shares.
  • They also participate in further dividends after all others have been paid.
  • They usually receive dividends before ordinary shares.


(c) Redeemable preference shares: Redeemable preference shares are shares which have prior claims to dividends before all other preference shares. The owners of the business can buy back these shares after some time. The shares are issued to finance a particular project. The redemption of preference shares must not be regarded as amounting to reduction of capital.


Features of redeemable preference shares

  • They have prior claims before other preference shares.
  • The can be bought back.
  • They are issued out to finance a particular project.


(d) Non-cumulative preference shares: In this type of share, the dividend does not accumulate from one year to another. Where a company fails to pay dividend in a particular year, it cannot be carried forward.


(e) Non-participating preference shares: Non-participating preference shares are the opposite of participating preference shares. They are not entitled to further dividends after the ordinary shares have been paid.


2) Ordinary shares: Ordinary shares are also known as equities. The ordinary shareholders are the real owners of the business. The holders are the risk bearers and they receive their dividends after all other shares have been paid. They can vote and be voted for. They have no fixed rate of dividend.


Features of ordinary share

  • There is no fixed rate of dividend.
  • They have voting rights.
  • The holders are the real owners of the business.
  • They are the risks bearers.
  • They receive dividends last, after others have been paid.


Types of ordinary shares

(a) Deferred or founders’ shares: Deferred shares are shares which are entitled to the remainder of profit after all other shares (preference and ordinary) have been paid. They are usually issued to the founders or promoters of the business.


Features of deferred shares

  • They have more voting rights.
  • They are issued to the founders of the business.
  • The holders are entitled to the remainder of the dividends after all others have been paid.


(b) Preferred ordinary shares: Preferred ordinary shares are shares which receive dividend after the preference shares have been paid. They have preference over other classes of ordinary shares.



The methods by which a company raises capital or issue its shares are:

  1. By prospectus: A prospectus, giving particulars of the company and its business, is published with application form. Shares are allotted to those who apply.
  2. By offer for sale: The whole issue of shares is allotted to an issuing house (merchant bank, finance house) which offers them to the public by means of a document known as “offer for sale.”
  3. By placing: This is the method of issuing securities through an intermediary such as a firm of stock brokers. The intermediary will endeavour to place the issue among its institutional investors.
  4. By a right issue: When a company is established, it may raise further capital by offering the shares concerned to existing members on favourable terms.
  5. By introduction: The company concerned can apply to the stock exchange for sales of its shares. There will be an offer to the public of a new issue of shares through the stock exchange.



There are different types of capital available to a company. These include:

  1. Issued capital: This represents the part of the authorised capital given out to members of the public for subscription. It is after the issued capital is fully subscribed that it can now be referred to as subscribed capital.
  2. Reserved capital: This represents the portion of the capital not called up, which the directors have assumed to be incapable of being called up any time. The uncalled-up capital is a liability to the company and is set aside for future expansion.
  3. Authorised capital: This is also called nominal or registered capital. This is the highest amount of capital stipulated in the memorandum of association considered as enough to set up and run a company.
  4. Called-up capital: This is the portion of the capital which the management considers good enough to be called up on the issued shares.



Stocks can be defined as the bundle of shares or mass of capital which can be transferred in fractional amounts Stocks are always fully paid, e.g. stocks can be quoted per N100 nominal value. It is a collection of shares into a bundle. Stocks are not issued but converted from shares issued.





  1. Unit of capital is transferable only in their entirety.
  2. Shares are issued.
  3. They are numbered serially
  4. Shares may be partly paid.



  1. Mass of capital, any of which is transferable.
  2. Stocks are converted from shares issued.
  3. Stocks are not numbered serially.
  4. Stocks are always fully paid.



A debenture may be defined as a bond, acknowledging a loan, generally under the company’s seal and bearing a fixed rate of interest. It is usually giving security for the repayment of the loan and the payment of the interest. In other words, debenture is a document setting out the terms of a loan to a company, i.e. a certificate of indebtedness. Holders of debenture cannot share from the profit of the company. The Company Act defines debenture as: “A written acknowledgement of indebtedness by the Company, setting out the terms and conditions of the indebtedness, and includes debenture stock, bonds and any other securities of a company, whether constituting a charge on the assets of the company or not.”


Types of debentures

  1. Mortgage debentures: Mortgage debentures are issued on the security of the company’s assets. It gives a charge upon the whole or part of the company’s assets upon liquidation.
  2. Simple or naked debentures: Where there is no charge created on the company’s property or assets, the debenture is described as naked or simple. In this case, there is no security for the debenture.
  3. Secured debenture: Secured debenture is the type whose repayment is guaranteed through a collateral security tendered by the borrower.
  4. Redeemable debenture: Redeemable debenture is repayable at a date which has been fixed or determined. A company may issue debentures which are liable to be redeemed.
  5. Irredeemable debenture: Irredeemable debenture is repayable only in the event of some specified contingency, such as winding up of the company. It cannot be cashed at any time and it is bought solely for interest payments.





  1. A debenture is a certificate of indebtedness.
  2. It is a loan.
  3. Holder is a creditor.
  4. Holder receives interest.
  5. Interest is credited to profit and loss account.
  6. The holder receives interest before profit.
  7. Entitled to fixed, regular and predetermined payment of interest.



  1. A share is a unit of capital.
  2. It is not a loan.
  3. Holder is one of the owners.
  4. Holder receives dividend.
  5. Dividend is credited to appropriation account.
  6. Holder will wait for the distribution of distribution profit.
  7. Entitled to dividends that may vary with the profits.





  1. It has no separate legal entity.
  2. It has unlimited liability.
  3. It has a minimum of two and a maximum of twenty.
  4. It is not separated from management, the partners and controlled by board of directors.
  5. Rights are regulated by deeds of partnership as they are not incorporated.
  6. No audit of account.
  7. Death or withdrawal of a partner can bring it to an end.
  8. Raising of capital is done through member’s contribution.


Public Limited Liability Company

  1. It has separate and distinct legal entity.
  2. It has limited liability.
  3. It has a minimum of seven and no maximum limit.
  4. Ownership is separated from as it is owned and controlled by as it is owned by shareholders.
  5. Governed by memorandum of association as they are incorporated.
  6. Law prescribes an annual audit and publishing of accounts.
  7. Company enjoys perpetual existence.
  8. Raising of capital can be done through issuance of shares to the public.

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