What are the public limited company disadvantages?

Question

What are the public limited company disadvantages?

Answer 1

Going Public - Disadvantages

Profit-sharing
If the firm is sitting on a highly successful venture, future success (and profit) has to be shared with outsiders. After the typical IPO, about 40% of the company remains with insiders, but this can vary from 1% to 88%, with 20% to 60% being comfortably normal.

Loss of Confidentiality
A major reason why firms resist going public is the loss of confidentiality in company operations and policies. For example, a company could be destroyed if the company were to disclose its technology or profitability to its competitors.

Reporting and Fiduciary Responsibilities
Public companies must continuously file reports with the SEC and the exchange they list on. They must comply with certain state securities laws ("blue sky"), NASD and exchange guidelines. This disclosure costs money and provides information to competitors.

Loss of Control
Outsiders are often in a position to take control of corporate management and might even fire the entrepreneur/company founder. While there are effective anti-takeover measures, investors are not willing to pay a high price for a company in which poor management could not be replaced.

IPO Expenses
An IPO is a costly undertaking. A typical firm may spend about 15-25% of the money raised on direct expenses. Even more resources are spent indirectly (management time, disruption of business).

Immediate Cash-out Usually Not Permitted
Typically, IPO entrepreneurs face various restrictions that do not permit them to cash out for many months after the IPO.

Liability
The company, its management, and other participants may be subject to liability for false or misleading statements and omissions in the registration documents or in the reports filed by the company after it becomes public. In addition management may be subject to law suits by the stockholders for breaches of fiduciary duty, self dealing and other claims, whether or not true.

Answer 2

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Answer 3

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What are the public limited company disadvantages?
What are the public limited company disadvantages?

Answer 4

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A public company has several advantages. It is able to raise funds and capital through the sale of its securities. This is the reason why public corporations are so important, historically; prior to their existence, it was very difficult to obtain large amounts of capital for private enterprises. In addition to the ease of raising capital, public companies may issue their securities as compensation for those that provide services to the company, such as their directors, officers and employees. While private companies may also issue their securities as compensation for services, the recipent of those securities often have difficulty selling those securities on the open market. Securities from a public company, typically have an established fair market value at any given time as determined by the price the security is sold for on the stock exchange where the security is traded. Another advantage is an increased public awareness of the company because IPOs often generate publicity by making their products known to a new group of potential customers. Subsequently this may lead to an increase in market share for the company. An IPO also may be used by founding individuals as an exit strategy. Many venture capitalists have used IPOs to cash in on successful companies that they helped start-up. Even with the benefits of an IPO, public companies often face many new challenges as well. One of the most important changes is the need for added disclosure for investors. Public companies are regulated by the Securities Exchange Act of 1934 in regard to periodic financial reporting, which may be difficult for newer public companies. They must also meet other rules and regulations that are monitored by the Securities and Exchange Commission (SEC). More importantly, especially for smaller companies, is the cost of complying with regulatory requirements can be very high. These costs have only increased with the advent of the Sarbanes-Oxley Act. Some of the additional costs include the generation of financial reporting documents, audit fees, investor relation departments and accounting oversight committees. Public companies also are faced with the added pressure of the market which may cause them to focus more on short-term results rather than long-term growth. The actions of the company's management also become increasingly scrutinized as investors constantly look for rising profits. This may lead management to perform somewhat questionable practices in order to boost earnings.

Answer 5

PUBLIC LIMITED COMPANY - B S N L PRIVATE LIMITED COMPANY - TATA INDICOM i give you two company name one is Public limited Company another is pvt company. all 90% public companies r corrupt i asked u which comapany u like. in this example u can get Your answer.