Companies and financial accounting
Companies and financial accounting

Start this free course now. Just create an account and sign in. Enrol and complete the course for a free statement of participation or digital badge if available.

Free course

Companies and financial accounting

1.4.4 Transferable and freely tradable shares

Private limited companies often have a clause in the Articles of Association which states that a shareholder needs approval from the other shareholders to sell or transfer their shares. This characteristic makes shareholders in private limited companies investors for the long term.

Shareholders in public limited companies can advertise their shares to the public. Being able to sell their shares to the public allows public limited companies to raise capital much more easily than private limited companies.

Public limited companies must publicly disclose more information than private companies. Most public limited companies are not listed on a stock exchange. Unlisted public limited companies may be traded in over the counter (OTC) markets. OTC markets are markets in which financial assets, including shares, are traded other than through a formal stock exchange. Most OTC trading is done by institutional investors (such as pension funds) between themselves. The largest OTC market in the world is the National Association of Securities Dealers Automated Quotations Systems (NASDAQ) in the USA.

The reason why public limited companies can raise capital more easily is that investors in public limited companies can buy and sell shares more easily. Shares in listed or quoted companies are the most liquid. Liquidity refers to the ease with which you can sell an asset for cash. A low level of liquidity makes an investment less attractive and less convenient. A high level of liquidity enables investors to buy and sell shares easily and frequently, but it also dis-incentivises them to spend time and effort on monitoring the board of directors.

B293_1

Take your learning further

Making the decision to study can be a big step, which is why you'll want a trusted University. The Open University has 50 years’ experience delivering flexible learning and 170,000 students are studying with us right now. Take a look at all Open University courses.

If you are new to University-level study, we offer two introductory routes to our qualifications. You could either choose to start with an Access module, or a module which allows you to count your previous learning towards an Open University qualification. Read our guide on Where to take your learning next for more information.

Not ready for formal University study? Then browse over 1000 free courses on OpenLearn and sign up to our newsletter to hear about new free courses as they are released.

Every year, thousands of students decide to study with The Open University. With over 120 qualifications, we’ve got the right course for you.

Request an Open University prospectus371