What is a Publicly Listed Company? 

23 Nov What is a Publicly Listed Company? 

A publicly listed company in simple terms is a company whose stocks and shares are intended to be freely traded on a stock exchange.  

Public companies are formed within the legal systems of particular countries they are registered in. For example, in the United States the public company is usually a type of corporation however, a corporation may not be a public company, whereas in the United Kingdom a public company will usually have a Public Limited Company as the legal form or simply PLC as its also known as. 

What are the advantages of a Publicly Listed Company? 

• Publicly traded companies are able to raise funds through the sale of stocks and shares. Privately listed companies can find it difficult to obtain funds as it must come from a smaller set of wealthy investors or banks must be willing to risk typically large investments. 
• The media, analysts and the general public are able to access information about the business as the company is legally bound to transparency.  
• Because many people have a vested interest in the company’s success, the company may be well-known in the public domain more than a private company. 
• Retail investors from the general public are able to own shares or a stake in a publicly listed company. 

What are some of disadvantages of a Publicly Listed Company? 

• Increased government, regulatory and public scrutiny Listed companies are vulnerable to increased scrutiny from the government, regulatory bodies, and the public. The company must meet mandatory reporting standards that are set by government bodies within the country they are registered or listed in. 
• Strict global accounting standards Publicly listed companies globally are required to prepare their financial reports in accordance with the International Financial Reporting Standards (IFRS). Shareholders are also entitled to key documents on the business activities of the company, which can result in being circulated in the public domain due to anybody holding a share will have access to it.
• The original owners lose control and ownership of the business although not in its entirely it is significantly reduced compared to private companies as soon as the company goes public 
• Difference in vision – Appointed Board of Directors may have different aims and goals to those of the shareholders. 

Are all companies required to be Publicly listed? 

No, although it is worth highlighting that a high number of publicly listed companies actually started as private companies and over the course of the years they went public as a way of gaining access to a wider pool of funds to finance their business operations, there is actually no obligation for any company regardless of the size to go public, in our video top 5 wealthiest families, we cover some of the biggest companies in the world which are still under private ownership. 

How to identify the Beneficial Owners of a Publicly Listed Company? 

As previously highlighted, publicly listed companies are subject to more scrutiny which means it will have more information publicly available than a private company. Most recognised exchanges within the company profile will have data on any majority shareholder whether it is a retail or institutional investor and the percentage held compared to the number of shares issued. An alternative to finding the ownership would be within the latest annual report of the listed company. 

Many listed companies are majority owned by other companies or institutional clients as they are known and can result in no actual natural person being considered the ultimate beneficial owner. When faced with this scenario it is the natural person with significant day to day control of the business who should be noted as the beneficial owner. 

What money laundering risk does a Publicly Listed Company present? 

The risk of money laundering can be found under any type company even a listed entity, however if the company going through the onboarding process is listed on a recognised exchange, it may be eligible for a simpler level of diligence due to the international disclosure standards they must meet being part of a recognised market. Nevertheless the diligence performed should be in line with your internal AML Policy and Procedures with any suspicious items or red flags identified raised to the business AML Compliance Officer. 

Lets recap the key points of a Publicly listed company 

• Trades its stocks and shares on a Stock Exchange
• More reporting requirements and scrutiny than a privately held company which helps to reduce the money laundering risk 
• Easier access to capital than a privately held company
• Ownership disclosure is a requirement for publicly listed companies

If you wish to watch the video version please click the below link: