Explain five benefits that a private limited company would get by converting to a public limited company. (10 marks)

Benefits that a private limited company would get by converting to a public limited company

​Benefits that a private limited company would get by converting to a public limited company include:

1. Ability to raise larger amounts of capital. Converting to a public limited company will enable the firm to access more funds by selling shares to members of the public through the stock exchange.
2. Enjoy permanency of capital. Shareholders cannot easily withdraw the shares bought in public limited companies such shares can only be sold to other investors.
3. Increased transparency and accountability. The shareholders must scrutinize and approve the company’s annual audited accounts which must also be published.
4. Increased public confidence in the company. This is due to increased exposure to the public and control by the stock exchange.
5. Freedom from interference by owners as it operates as a separate legal entity in which owners have no direct managerial control.
6. Increased professionalism and specialization in management. It is mandatory to have professional managers and staff to run the company on behalf of the shareholders.
7. Perpetual succession. The firm is assured of continuity since shares can be transferred and membership changed without affecting the business.

Forms of business units Form 2 Level

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