The owners of all private limited companies should consider converting their businesses into public

limited companies. EVALUATE this view. [12]

Private limited companies are companies held under private ownership with shares that are not traded
publicly on stock exchanges. While public limited companies are companies that offered shares of stock
to the general public on a stock market. Therefore, when a private limited company convert into public
limited company, their shares are open to the public and anyone who buys the shares owns a part of the
company, thus becoming a shareholder. GOOD ANALYSIS

The first benefit of the conversion is that it helps to raise capital investment for the business through the
public issue of shares. When a business has sufficient financial resources, they can plan for innovation.
This means that there are more chances for the business to develop its products and services to cope with
the changes in customer demand and satisfy customer requirements at any time. The success of attracting
and pleasing the customer can help the business to gain good reputation and build brand image to exceed
their competitors. However, if the capital investment were not used efficiently, the business could go into
crisis and have a hard time dealing with its potential debt. GOOD ANALYSIS

When public limited companies have greater access to financial resources, they have more opportunities
for expansion. Expansion then can lead to the benefit of economies of scale - this is when there is a
reduction in average costs as the business increases in size. For instance, businesses are now able to
afford to buy expensive machinery to do, as such flow production. Due to this, the production process is
faster and at the same time reducing the recruitment of labour, thus eliminating business waste to overall
decrease the cost of production and increase productivity of the business. However, if the expansion are
out reached, when the business grows beyond a certain size, this could lead to diseconomies of scale.

Another benefit to consider is that the issue of shares is more transferable in public limited companies
than in private limited companies. The process of transferring does not require much effort. As a result,
shareholders are less bound to remain with the company, which can provide them with greater comfort in
the issue of shares and make people more willing to invest in the business. Public limited companies are
also easier to deal with situations like a shareholder’s death, allowing shares to be transmitted in line with
the terms of any will. However, since shares are more transferable, it can have a dramatic impact on the
price of shares, and in turn, the value of the company. This can mean that higher dividends are needed to
be paid to shareholders if more share are sell to the public.

Very well written Phoung – I would add more evaluation by stating reasons why converting may
not be a good idea e.g. publishing of accounts in much greater detail for PLCs than Private Limited
Companies.