Did you know?  Private and Public Companies

A quick stat which you can use to impress your students when they cover private and public companies in the new term…

In the UK there are currently (as at 30 June 2010) 2,371,460 private limited companies active and registered with Companies House. By comparison, there are just 8,967 public companies.

Of those 8,967 public companies, only 2,747 companies have their shares listed on a recognised stock market. And of those 2,747 listed companies, only 1,120 are listed on the main London Stock Exchange.

Which just goes to show how important private limited companies are in terms of their popularity as a legal structure.

This area is always a fruitful source of errors by the business textbooks. I came across a couple of howlers in two newly-published AQA GCSE textbooks yesterday to illustrate the point:

Howler 1: “Public companies make their shares available to investors on stock markets which means that they are more vulnerable to takeover”: Correction: only about a quarter of public companies are listed; most public companies are privately owned

Howler 2: “If a private limited company wishes to raise additional capital itis not allowed to sell its shares to just anybody - only existing shareholders are allowed to put extra money into the business” Correction: complete nonsense. Existing shareholders have “pre-emption rights” to be able to buy new shares in the company first, but there is nothing to prevent a private company from raising capital by bringing in new shareholders.