A company whose securities are traded on a stock exchange and can be bought and sold by anyone. Public companies are strictly regulated, and are required by law to publish their complete and true financial position, so that investors can determine the true worth of its stock (shares). It is also called publicly held company or publicly-traded company. It is a business firm in the public (non-private) sector of an economy, controlled and operated by civil servants or government personnel (and not by private individuals). In a public company, the ownership is shared between the shareholders, including the board, management and public shareholders. Minimum three Directors and seven members are required for establishing a Public Limited Company. A company has issued securities through an initial public offering (IPO) and is traded on at least one stock exchange or in the over the counter market.
- It is a corporate body created by the special act in the state or central legislature. It is completely owned by the government and as such no private individuals are entitled to purchase shares of these organisations.
- It enjoys the status of a Separate legal entity and as such it can enter into contract in its own name.
- Liability of Shareholder for the losses of the company is limited to their share contribution only. Owners and stockholders are given indemnity from the debts or actions of the corporation, so shareholders and directors are not liable for the debts and obligations of the corporation.
- A public limited company has a minimum number of seven shareholders or members and a limitless number of members. It can have as many shareholders as its share capital can accommodate.
- Shares of a public limited company are bought and sold in a stock exchange market. They are freely transferable between its members and people trading in the stock exchange
- Easy Availability of Larger funds
The capital of a public company is generally raised from the public. Public company can sell its shares to the public can invest their money; the potential capital that can be raised is larger. A sole proprietorship, or ordinary business partnership, cannot usually raise the same amount of capital without additional leverage. Moreover, there is no restriction on the number of members in a public company. Therefore, it can raise huge financial resources.
- Transferability of shares
The shares of a public company are freely transferable. This makes investment in the shares liquid and an investor is not bound to remain with the company.
- Business Continuity
A public company will continue to operate for as long as there is a board of directors and management staff that will take the helm of the company. In other types of companies, the business entity ceases to exist once the founding members are no longer present or if there have been changes to the company’s ownership structure.
- Growth of capital market
A public limited company facilitates the growth of a healthy capital market primary and secondary markets for securities have developed largely due to the shares and debentures issued by public companies. Public companies also contribute to the growth of financial institutions and banks.
- Public confidence
A public company enjoys greater confidence of public because its accounts are published and it operates under statutory regulation and control. Shares of a public company are traded on stock exchanges. Any shareholder can find out the value of his investment from stock exchange quotations