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Both the private limited company and the public limited company are legal entities with limited liability. Although both forms of business are similar in many ways, they are different.

The private limited company (Ltd)

The Ltd is a legal form with legal personality with limited liability. The capital of the Ltd is divided into shares. A shareholder is not personally liable with his private assets for what is done in the name of the company, nor for any debts of the company. Creditors are only entitled to the capital of the company. The shareholders therefore only run the risk of losing their own contribution to the capital of the company.

Setting up a private limited company

The following elementary requirements are set for the incorporation of an Ltd:

  • The company is incorporated by one or more persons by notarial deed. The deed is signed by each founder and by anyone who takes one or more shares;
  • The company must have a starting capital of at least € 0.01; and
  • The company must be registered in the Trade Register of the Chamber of Commerce.

The structure of a private limited company

The capital of a BV is divided into one or more transferable shares. The shares are registered. The general meeting of shareholders is entitled to all powers that have not been assigned to the board or others. The board is charged with the management and representation of the company and focuses on the interests of the company. Depending on the management model chosen, the company can set up a supervisory board or have one or more non-executive directors who supervise the policy of the management board. The management board and the supervisory board of the company shall provide the general meeting with all required information, unless there is an overriding interest in doing so.

The public limited company (PLC)

Like the Ltd, the PLC is a company with legal personality and limited liability. Its assets are also divided into shares. Shareholders are therefore not personally liable with their private assets for what is performed in the name of the company, nor for any debts of the company. Shareholders are only liable for the value of their share in the company.

Setting up a public limited company

The following basic requirements are set for the establishment of a PLC:

  • The company is established by one or more persons by notarial deed. The deed is signed by each founder and by anyone who takes one or more shares;
  • The minimum starting capital is €45,000; and
  • The company must be registered in the Trade Register of the Chamber of Commerce.

The structure of a public limited company

The capital of the PLC is divided into shares. Unlike the Ltd, the PLC can issue bearer shares, in addition to registered shares. The board is charged with the management and representation of the company and focuses on the interests of the company. As with the Ltd, the role of the supervisors is often fulfilled by a supervisory board or in international companies by one or more non-executive directors. The management board and the supervisory board shall provide the general meeting with all required information, unless there is an overriding interest in doing so.

The main differences between a PLC and an Ltd

  • The minimum starting capital for an Ltd is only €0.01 while the starting capital for a PLC is €45,000;
  • The articles of association of an Ltd may contain a blocking arrangement. This means that a shareholder who wants to sell his shares must first offer them to the other shareholders. The PLC has no compulsory blocking arrangement.
  • The shares of the Ltd can only be transferred by means of a notarial deed. The shares of a listed PLC can be traded freely on the stock exchange. A notarial deed is also required for the transfer of registered shares in an unlisted PLC
  • Only an Ltd is required to carry out a distribution test. The test shows whether the Ltd can continue to meet its obligations after a dividend payment. Directors are personally liable if they act in violation of the benefits test.

 Do you have questions about (establishing) a Ltd or PLC? VIOTTA is happy to help

When you want to start a business, it is important to choose the right legal form. This decision does not only determine liability for debts, but also for tax reasons, among other things. VIOTTA’s lawyers are experienced with the various legal forms and are happy to help you with questions (about the establishment of) a Ltd or PLC.

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