ACCA Applied Knowledge · Business and Technology · The purpose and types of business organisation
Which of the following is the most significant disadvantage of a company being a public listed company rather than a private company?
The main disadvantage is the heavier regulation and disclosure burden together with vulnerability to takeover, because shares are freely traded. Listing does not remove limited liability or separate legal personality, and it actually improves, rather than prevents, access to equity finance.
- AShareholders have unlimited liability
- BThe company cannot raise equity finance from investors
- CGreater regulatory and disclosure requirements and exposure to takeoverCorrect
- DThe company loses its separate legal personality
Explanation
Listed companies face extensive disclosure, governance and listing rules and their freely traded shares make hostile takeover possible. Liability remains limited, access to equity is a benefit not a drawback, and legal personality is retained.
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