Company formation - Changing from private to public company

Learning Outcomes

This article outlines the conversion of a private limited company to a public limited company (PLC) under the Companies Act 2006, including:

• Eligibility requirements for re-registration, continuity of corporate personality on conversion, and which private companies can and cannot become PLCs
• The statutory re-registration process: board and shareholder decision-making, special resolutions, amendments to articles and name, and the RR01 filing package
• Capital and balance-sheet tests for PLC status, including the authorised minimum, paid-up share capital thresholds, and the net assets sufficiency requirement
• The role of auditors and independent valuers in verifying capital, reviewing recent balance sheets, and safeguarding against overvaluation of non-cash consideration
• Changes to management and governance on conversion, such as minimum director numbers, appointment of a qualified company secretary, AGMs, audit, and accelerated filing deadlines
• The distinction between a trading certificate for newly formed PLCs and the effect of a certificate of incorporation on re-registration, plus the consequences of trading prematurely
• Enhanced disclosure and capital maintenance obligations for PLCs, including the “serious loss of capital” meeting trigger and restrictions on share issues
• How PLC status interacts with public offers, listing ambitions, and the financial services regulatory framework beyond Companies Act compliance
• Techniques for tackling SQE1-style multiple-choice and scenario questions on company conversion, focusing on common traps, precise statutory references, and exam language

SQE1 Syllabus

For SQE1, you are required to understand the legal and procedural steps for changing a private company to a public company, with a focus on the following syllabus points:

• the statutory process for re-registering a private company as a public company under the Companies Act 2006
• the minimum share capital and payment requirements for PLC status, including the authorised minimum
• the changes to company officers and governance obligations
• the documentation and shareholder approvals required for re-registration (including RR01, balance sheet, auditor’s report, and amended articles)
• the treatment of non-cash consideration and valuation safeguards on conversion
• the effect of re-registration on the company’s name and articles of association
• the trading certificate regime and how it differs where the company re-registers (rather than being formed as a PLC from the outset)
• the consequences of non-compliance with the statutory process (including criminal offences and personal liability for pre‑certificate trading)
• how the re-registration interacts with public offer restrictions (private company prohibitions under CA 2006, s 755) and post-conversion market regulation
• PLC‑specific ongoing obligations: AGM requirement, audit, accelerated filing deadlines and director/company secretary qualifications
• capital maintenance considerations that become more prominent for PLCs (including the “serious loss of capital” meeting trigger)

Test Your Knowledge

Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision.

1. What is the minimum allotted share capital required for a company to re-register as a public limited company?
2. Which company officers must a PLC have that a private company is not required to appoint?
3. What shareholder approval is needed to re-register a private company as a PLC?
4. What is the effect if a company begins trading as a PLC before obtaining a trading certificate?

Introduction

When a private limited company wishes to become a public limited company (PLC), it must follow a specific statutory process set out in the Companies Act 2006. This change is significant, as a PLC can offer its shares to the public and is subject to stricter legal, capital, and governance requirements. For SQE1, you must be able to explain the legal steps, capital requirements, and practical consequences of re-registering as a PLC.

Legal Framework for Re-registration

A private company can only become a PLC by re-registering as a public company under the Companies Act 2006 (CA 2006, ss 90–96). This process is not automatic and requires strict compliance with statutory requirements. The registrar will issue a new certificate of incorporation on re-registration, which takes effect from the date of issue.

Importantly, re-registration does not create a new legal person; the company’s corporate personality is continuous. Rights and obligations remain vested in the same legal entity; what changes is its status (and name suffix), not its identity. Contractual relationships generally continue uninterrupted. However, certain articles and governance provisions will need to be replaced or adapted so that the company meets PLC standards.

Public company status can only be held by companies with share capital. A private company limited by shares is eligible to re-register, and a company limited by guarantee having a share capital may also qualify. A company with no share capital cannot re-register as a PLC because a PLC must have share capital.

Key Term: re-registration
The process by which a private company formally changes its status to a public limited company under the Companies Act 2006.

Statutory Requirements

To re-register as a PLC, a private company must:

• Pass a special resolution approving the re-registration (at least 75% of votes in favour) and approving any necessary changes to the articles and company name (to add “plc”).
• Amend its articles of association to comply with PLC requirements.
• Satisfy the minimum share capital and payment requirements, and be able to demonstrate this to the registrar.
• Appoint the required company officers for a PLC (including a qualified company secretary).
• Submit the prescribed documents to Companies House.

Key Term: special resolution
A shareholder resolution requiring at least 75% approval, used for major company decisions such as re-registration.

On the capital test at re-registration, CA 2006 requires not only a minimum nominal amount of allotted share capital, but also that the requisite proportion of it is paid up in cash or kind. The registrar will not grant re-registration unless these tests are met and evidenced by the company’s filings. The auditors’ verification therefore becomes central to the application.

Additionally, the company must be in compliance with other statutory and filing obligations at the time of application. Any deficiencies (for example, overdue accounts or confirmation statements) can delay or derail re-registration until remedied.

Minimum Share Capital

A PLC must have an allotted share capital of at least £50,000 (as prescribed) (CA 2006, s 763). This is referred to in the statute as the authorised minimum. Current regulations set the authorised minimum in sterling; ensure your answer uses £50,000 unless a different sum is prescribed by up‑to‑date regulations.

At least one-quarter of the nominal value of each share and the whole of any premium must be paid up before a public company can obtain a trading certificate and commence business, and equivalent payment-status conditions are verified for companies that re-register. For companies converting from private status, the registrar effectively checks that the public company capital regime is satisfied before issuing the certificate of incorporation on re-registration.

If the company has partly paid shares, directors may need to make calls to bring the paid-up amount to the required level. The terms on which shares were issued (and any calls schedule) will dictate how and when unpaid amounts can be demanded; in practice, getting to the quarter-paid threshold across the class is essential to proceed.

Key Term: minimum share capital
The statutory minimum amount of allotted share capital required for a PLC. The nominal value of the allotted share capital must be at least the authorised minimum.

Key Term: authorised minimum
The minimum nominal value of a public company’s allotted share capital required by CA 2006, currently £50,000 (or the prescribed euro equivalent) (CA 2006, s 763).

Company Officers

A PLC must have at least two directors (CA 2006, s 154) and a qualified company secretary (CA 2006, s 271). At least one director must be a natural person (CA 2006, s 155). The company secretary must have the requisite knowledge and experience or hold recognised professional qualifications (CA 2006, s 273), such as membership of a prescribed professional body (for example, the Chartered Governance Institute). Private companies need not appoint a secretary, so this is a significant change on re-registration.

It is prudent to check director numbers early in the conversion timetable and plan appointments to avoid falling foul of the two-director rule from the moment PLC status is acquired.

Key Term: company secretary
An officer responsible for ensuring the company complies with statutory and regulatory requirements. A PLC must have a qualified company secretary.

Articles of Association

The company must amend its articles to reflect PLC requirements and remove provisions incompatible with public company status. Common amendments include:

• adopting or adapting the model articles for public companies (Companies (Model Articles) Regulations 2008, Sch 3)
• ensuring the articles recognise the requirement for a qualified company secretary
• adjusting director decision-making and quorum provisions for a multi-director board
• removing provisions tailored to private companies only (for example, private company share transfer clauses that are inconsistent with intended public offers or listings)

A PLC may still include transfer restrictions and pre-emption rights in its articles if commercially desirable. Re-registration as a PLC does not automatically remove those restrictions; it only permits public offers from a company-law standpoint, subject to financial services regulation. Equally, PLCs cannot rely on private company exemptions in areas such as AGMs or accounts filing; the articles must be consistent with the enhanced public company regime.

Procedural Steps for Re-registration

The process for re-registering as a PLC involves several key steps:

• Board meeting:
  • approve the proposal to re-register and any required capital actions to meet the authorised minimum and paid-up tests
  • approve the draft special resolution(s) and amendments to the articles and name
  • call a general meeting (or circulate a written resolution if appropriate)
• General meeting (or written resolution):
  • pass a special resolution to re-register as a public company
  • pass a special resolution to adopt new or amended articles
  • pass a special resolution to change the company’s name to include “public limited company” or “plc” (CA 2006, s 77)
• Application to Companies House (Form RR01), including:
  • the special resolution(s)
  • the amended articles of association
  • a statement of compliance
  • a statement of capital
  • a balance sheet not more than seven months old
  • an auditor’s report on the balance sheet and verification statements required by the Act
  • any required valuation report for non-cash consideration issued for shares since the balance sheet date
• Registrar review:
  • the registrar checks whether statutory requirements are met and, if satisfied, issues a certificate of incorporation on re-registration stating that the company is now a public company (CA 2006, s 96)

Once the certificate of incorporation on re-registration is issued, the PLC status is effective immediately. Ensure banks, key counterparties, insurers, regulators and registries are notified and records updated promptly.

Key Term: trading certificate
A certificate issued by Companies House permitting a public company to commence business and exercise borrowing powers. It is a criminal offence for a PLC formed as such to trade or borrow before obtaining this certificate. For a private company that re-registers as a PLC, the registrar’s certificate of incorporation on re-registration operates such that no separate trading certificate application is generally required.

Practical point on notice and timing: special resolutions can be passed at a general meeting held on short notice if a majority in number of the shareholders holding at least 90% of the voting rights consent (as the company is still private at that stage) (CA 2006, s 307(4)–(6)). This can accelerate the timetable if stakeholder alignment is strong.

Evidence to support re-registration

The filings accompanying RR01 are not mere formalities. The auditor’s report must confirm that:

• the balance sheet has been properly prepared
• the company’s net assets are not less than the aggregate of its called-up share capital and undistributable reserves as shown in the balance sheet
• the required level of paid-up share capital has been received (that is, at least one-quarter of the nominal value of each share and the whole of any premium)

If any shares have been allotted for non-cash consideration since the balance sheet date, an independent valuation report complying with CA 2006, s 593 must be provided or otherwise the auditor must report that the statutory valuation safeguards have been satisfied.

The auditor must be eligible to act (statutory auditor), and the valuation must be by a suitably qualified independent expert. There are limited statutory exceptions to the valuation requirement (for example, certain employee share schemes and small amounts), but in the context of conversion the conservative approach is to obtain valuations where any doubt exists.

Worked Example 1.1

A private company, Alpha Solutions Ltd, wishes to become a PLC to raise capital from the public. It has an allotted share capital of £60,000, with £15,000 paid up. The directors call a general meeting, and the shareholders pass a special resolution to re-register and adopt new articles. The company submits the required documents and auditor’s report to Companies House. What must Alpha Solutions do before it can begin trading as a PLC?

Answer:
Alpha Solutions must meet the capital and payment tests. A company formed as a PLC needs a trading certificate before commencing business or borrowing; however, for a private company re-registering as a PLC, the registrar will only issue the certificate of incorporation on re-registration once the statutory capital tests are satisfied. In practice, on re-registration no separate trading certificate application is required; trading may continue once the new certificate of incorporation (stating PLC status) is issued.

Capital and Financial Requirements

A PLC must meet strict capital requirements to protect public investors.

• Minimum share capital:
  • the nominal value of the company’s allotted share capital must be at least the authorised minimum of £50,000 (CA 2006, s 763)
• Paid-up amount:
  • at least one-quarter of the nominal value of each share and the whole of any premium must be paid up
• Net assets sufficiency:
  • the auditor’s report on a recent balance sheet must demonstrate that the company’s net assets are not less than its called-up share capital and undistributable reserves
• Non-cash consideration safeguards:
  • if shares have been issued for non-cash consideration, statutory valuation safeguards apply for public companies (CA 2006, ss 593–597)

These conditions operate in two connected places. First, they are verified at re-registration (RR01 and the auditor’s report). Secondly, for a PLC formed as such, they are part of the application for a trading certificate. On re-registration, the registrar performs the equivalent checks before issuing the certificate of incorporation on re-registration.

Directors should check the capital structure and reserves position before initiating conversion. If net assets are weak, consider capital actions (for example, fresh equity injection, conversion of shareholder loans to equity, or cancellation of distributable reserves where permitted) to ensure the net assets test is met when audited.

Worked Example 1.2

Beta Innovations Ltd has allotted share capital of £52,000, but only £10,000 is paid up. Can it re-register as a PLC?

Answer:
Not yet. The allotted share capital meets the authorised minimum (£50,000), but at least one-quarter of the nominal value of each share and the whole of any premium must be paid up at the point of re-registration verification. Beta Innovations Ltd must first ensure the paid-up amount meets the statutory minimum before the registrar will grant re-registration.

Governance and Disclosure Changes

Re-registration as a PLC brings stricter governance and disclosure obligations.

• Directors:
  • at least two directors are required; at least one must be a natural person
• Company secretary:
  • a PLC must appoint a qualified company secretary; qualifications or experience must meet CA 2006, s 273
• Financial reporting:
  • PLCs must file audited accounts within six months of the financial year end (CA 2006, s 442(2))
• Transparency:
  • PLCs must disclose directors’ remuneration, substantial shareholdings, and related party transactions in accordance with company law and accounting standards
• Capital maintenance and share issues:
  • PLCs are subject to the capital maintenance regime; further share issues must comply with directors’ authority to allot (CA 2006, ss 549–551) and statutory pre-emption rights on equity securities (CA 2006, ss 561–570), unless validly disapplied

Public companies also have additional meeting obligations compared to many private companies. A PLC must hold an AGM (unless exempt under a specific regime), and shareholder engagement tends to be higher. The PLC audit requirement is not subject to the small company exemption; a statutory audit is required.

Key Term: public limited company (PLC)
A company registered under the Companies Act 2006 as a public company, able to offer shares to the public and subject to enhanced regulation.

Post-re-registration name and branding

The company must change its name to include “public limited company” or “plc” (CA 2006, s 58), ensure stationery and online disclosures reflect the change, and update banks, contractual counterparties, regulators (if applicable), insurers and relevant registers.

Plan for practical points: amend the common seal (if used), update letterhead, invoices, email footers, website and signage, and notify tax authorities and pension providers. Lenders may have covenants tied to status or name that require consent; address these in advance.

Exam Warning

For SQE1, remember that a PLC cannot commence business or exercise borrowing powers until it has received a trading certificate. Trading or borrowing before this is a criminal offence for the company and its officers. Where a private company re-registers as a PLC, the registrar’s certificate of incorporation on re-registration is issued only once the capital tests are satisfied; no separate trading certificate application is generally required.

Practical Implications and Strategic Considerations

Re-registering as a PLC allows a company to raise capital from the public and may be a step towards listing on a stock exchange. However, it also increases regulatory scrutiny, reporting obligations, and costs. The company must balance the benefits of public fundraising against the demands of PLC status.

Points to weigh include:

• Capital strategy:
  • whether re-registration is needed to access broader equity pools or whether private placements suffice
• Articles and shareholder rights:
  • whether to retain or relax transfer restrictions and pre-emption rights in the articles, in light of investor expectations
• Board composition and governance:
  • appointing a suitably qualified company secretary and ensuring the board has the skills and independence needed for a public company (particularly if listing is contemplated)
• Transaction readiness:
  • preparing audited financial statements, strengthening controls and reporting systems, and ensuring compliance capacity for more frequent disclosure and market communications
• Non-cash consideration and historic share issues:
  • confirming that any prior ‘shares for assets’ arrangements have appropriate valuations or remedial steps where required under public company rules

Beyond company law, note that a private company is prohibited from offering securities to the public (CA 2006, s 755). PLC conversion lifts this company-law restriction, but public offers are then subject to the Financial Services and Markets Act 2000 (FSMA) and FCA rules. Listing on a regulated market is a separate process with its own eligibility criteria.

Worked Example 1.3

Gamma Foods Ltd wants to expand and decides to re-register as a PLC. After re-registration, it plans to offer shares to the public. What additional steps must Gamma Foods take if it wishes to list its shares on the London Stock Exchange?

Answer:
Gamma Foods must comply with the Financial Services and Markets Act 2000, the FCA’s Listing Rules, the Prospectus Regulation Rules (where a prospectus is required), and the Disclosure Guidance and Transparency Rules. It will also need to consider compliance with the UK Corporate Governance Code if seeking a premium listing. Listing is a separate process from re-registration as a PLC; re-registration merely satisfies company law status.

Documents and Evidence the Registrar Expects

In practice, Companies House expects a complete and coherent package with RR01:

• Special resolution(s) approving re-registration, articles changes and name change
• Amended articles of association suitable for a public company
• Statement of compliance and statement of capital
• Recent balance sheet (not more than seven months old) and an unqualified auditor’s report that:
  • confirms proper preparation of the balance sheet
  • confirms the net assets test (net assets are at least equal to called-up share capital and undistributable reserves)
  • confirms paid-up capital status (quarter of nominal and all premium received)
• Any valuation report under CA 2006, s 593 where shares have been issued for non-cash consideration since the balance sheet date
• Any supplemental board or shareholder documentation needed to explain capital changes undertaken to reach the authorised minimum

If filings are incomplete or inconsistent (for example, a paid-up capital statement does not match the statement of capital), the registrar may reject the application or seek clarification.

Counsel the auditors and the board to align on the precise figures and definitions used (for instance, “undistributable reserves” and “called-up” amounts) to avoid queries. If the company’s balance sheet date is approaching the seven‑month limit, consider preparing interim accounts if needed.

Trading certificate: new PLCs vs re-registered PLCs

• New PLCs (incorporated as public from the outset) must apply separately for a trading certificate (CA 2006, s 761). Trading or borrowing before the certificate is issued is a criminal offence and can expose directors to personal liability for pre-certificate debts if unpaid (see below).
• Re-registered PLCs do not typically make a separate trading certificate application. The registrar issues the new certificate of incorporation on re-registration only after confirming the capital and payment requirements; the company may continue business under its new status on issue of that certificate.

If a PLC trades without a trading certificate (where one is required), civil consequences can include director liability for certain debts if the company fails to pay within the statutory period. This regime is designed to ensure that the capital protection framework is in place before public business commences.

Worked Example 1.4

Delta Tech Ltd has £55,000 nominal share capital allotted and wishes to re-register as a PLC. £13,750 of nominal capital and all share premium have been received. Since the date of the last balance sheet (five months ago), it issued shares for machinery rather than cash. What additional evidence will the registrar expect?

Answer:
In addition to the usual RR01 pack and auditor’s report, the registrar will expect an independent valuation report complying with CA 2006, s 593 for the non-cash consideration issued since the balance sheet date, or confirmation that the statutory valuation safeguards have been met. The auditor’s report must still verify the capital and net assets tests by reference to the balance sheet and subsequent events.

Consequences of Non-compliance

Failure to comply with the statutory framework can have serious consequences:

• Trading without certificate (new PLCs):
  • a public company formed as such commits an offence if it carries on business or borrows without a trading certificate (CA 2006, s 761)
  • the company and any officer in default may be liable to fines
  • directors can also become personally liable for debts incurred during the period of unauthorised trading if unpaid within the prescribed period (akin to CA 2006, s 767 effects)
• Defective re-registration filings:
  • the registrar can refuse re-registration until the statutory evidence is provided
  • material misstatements in a statement of compliance or auditor’s report may expose officers and the auditor to liability
• Non-compliant share issues:
  • issuing shares for non-cash consideration without the requisite valuation safeguards for a public company can render the allotment voidable and expose directors to liability to the company

Where a PLC formed as such trades before the trading certificate is issued, the directors may be jointly and severally liable to pay relevant debts if the company fails to settle them within the statutory period after they fall due. Stop trading immediately and regularise the position.

The general offence of making a false or misleading filing to the registrar is also relevant. Knowingly or recklessly delivering a false, deceptive or misleading document to Companies House can attract criminal liability.

Worked Example 1.5

Echo PLC was formed as a public company and began borrowing the week after incorporation. It later discovers no trading certificate has been issued. Several invoices remain unpaid 21 days after due date. What are the risks?

Answer:
Trading without a trading certificate is a criminal offence for the company and its officers. In addition, directors may be jointly and severally liable for relevant debts incurred before the certificate is issued if the company fails to pay within the statutory period. Echo PLC should cease trading and apply for the trading certificate promptly, and the board should seek urgent legal advice on potential liabilities.

Revision Tip

For SQE1, focus on the statutory steps for re-registration, the capital and officer requirements, and the consequences of non-compliance. Practise applying the rules on the authorised minimum, paid-up capital, and the distinct treatment of trading certificates for newly formed PLCs versus re-registered PLCs.

Additional Exam-Focused Points and Examples

Several practical and doctrinal points recur in SQE1 questions on conversion.

1. Eligibility to re-register: ensure the company has or will have a share capital meeting the authorised minimum. A company limited by shares is the standard candidate; a company with no share capital cannot become a PLC.
2. Continuity of legal personality: stress that conversion does not void contracts or change the legal entity; existing liabilities continue.
3. Public offers after conversion: conversion removes the company-law bar on public offers, but all securities offerings must comply with FSMA and FCA rules, and may require a prospectus.
4. PLC governance discipline:
   • AGM must be held
   • statutory audit required
   • accounts filing deadline reduced to six months
   • stricter disclosure around directors’ remuneration and related-party transactions

Worked Example 1.6

Orion Design Ltd has £50,000 nominal share capital, fully allotted. £12,500 of nominal value has been paid, with no premium. Its net assets equal called-up capital plus undistributable reserves. The company plans to convert to PLC and immediately offer shares to the public without listing. Is conversion sufficient to permit the offer?

Answer:
Yes from a company-law standpoint: once re-registered as a PLC, the s 755 prohibition on public offers for private companies no longer applies. However, any public offer must comply with FSMA and the FCA’s Prospectus Regulation Rules where a prospectus is required, and the Financial Promotions regime. Listing is not required for a public offer, but securities regulation will apply.

Worked Example 1.7

Nova Engineering Ltd’s balance sheet shows net assets just equal to called-up share capital and undistributable reserves. Six weeks after converting to PLC, the directors discover net assets have declined significantly, now less than half of its called-up share capital. What action must the board take?

Answer:
Where a PLC’s net assets fall to less than half of its called-up share capital, the directors must, not later than 28 days after the earlier of when they become aware of that fact or ought reasonably to have become aware, call a general meeting to consider whether any, and if so what, measures should be taken (the “serious loss of capital” meeting trigger). This is part of capital maintenance discipline for PLCs. It does not undo conversion, but requires prompt shareholder engagement.

Worked Example 1.8

Atlas Robotics Ltd is private and has two directors, one corporate and one individual. It plans to convert to PLC and maintain the same board. Are further board appointments necessary?

Answer:
Yes. A PLC must have at least two directors and at least one must be a natural person. If Atlas intends to maintain one corporate and one individual director, that satisfies the minimum numbers. However, confirm future restrictions on corporate directors and ensure the board composition remains compliant. The PLC must also appoint a suitably qualified company secretary.

Key compliance and planning points

• Short notice for special resolutions is available at the private stage if 90% (or higher if articles require) of voting rights consent. After conversion, PLC meeting rules apply.
• Consider updating the PSC register and filing the confirmation statement to reflect article changes, officer appointments and share capital structure as part of conversion housekeeping.
• Lenders and investors often include covenants about changes in status and name; notify and obtain consents in advance.
• Align articles with CA 2006 PLC model articles or a tailored set approved by investors. Be wary of private-company features that are incompatible with PLC requirements (for example, written AGM waivers).
• Ensure authority to allot (s 551) and pre-emption (s 561) provisions are fit for purpose post-conversion, including any disapplication by special resolution for a defined period.

Key Point Checklist

This article has covered the following key knowledge points:

• The statutory process for re-registering a private company as a public limited company under the Companies Act 2006
• The authorised minimum of £50,000 nominal allotted capital for PLC status and the one‑quarter paid-up plus full premium requirement
• The need for a special resolution, amended articles and a name change to include “plc”
• The requirement for at least two directors and a qualified company secretary
• The filings required with RR01, including a recent balance sheet and an unqualified auditor’s report, and valuation safeguards for non-cash consideration
• The distinction between trading certificates for new PLCs and the effect of the certificate of incorporation on re-registration
• The enhanced governance and disclosure obligations for PLCs and the consequences of non-compliance (including offences and potential personal liability)
• The interaction between PLC status and the public offer regime, and the separate requirements for listing
• Practical timing points: short notice for special resolutions while still private; post-conversion AGM and audit requirements
• Capital maintenance discipline for PLCs, including the serious loss of capital meeting trigger

Key Terms and Concepts

• re-registration
• special resolution
• minimum share capital
• authorised minimum
• company secretary
• trading certificate
• public limited company (PLC)