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Public Corporation

What Is a Public Corporation?

A public corporation is a company whose shares are publicly traded on a stock exchange and can be bought and sold by anyone. These corporations are subject to strict regulatory requirements and transparency standards.

Public Corporation Explained

A public corporation, also known as a publicly traded company or public company, is characterized by the sale of its stock to the general public through a stock exchange or over-the-counter market. This structure allows for a broad base of shareholders and provides the corporation with the ability to raise significant capital by issuing shares to the public.

Key Features of a Public Corporation:

Publicly Traded Shares: Shares are available for purchase by the general public.

Regulatory Oversight: Subject to regulations by securities authorities (e.g., the SEC in the United States) which mandate regular financial disclosures and adherence to corporate governance standards.

Transparency: Required to provide detailed financial information to the public, including quarterly and annual reports.

Liquidity: Shares can be easily bought and sold on the stock exchange, providing liquidity to shareholders.

Corporate Governance: Typically has a board of directors elected by shareholders to oversee the company's management.

The Term Public Corporation in Different Legal Contexts

United States: In the United States, public corporations must register with the Securities and Exchange Commission (SEC) and comply with the Securities Act of 1933 and the Securities Exchange Act of 1934. They are required to file annual and quarterly reports, known as 10-Ks and 10-Qs, respectively, as well as other disclosures about significant events (8-Ks).

European Union: Public corporations in the EU are subject to regulations by the European Securities and Markets Authority (ESMA) and must comply with the Market Abuse Regulation (MAR) and the Transparency Directive, among other requirements. They must provide regular disclosures to ensure market transparency and protect investors.

Common Misconceptions About the Meaning of Public Corporation

A common misconception is that public corporations are owned by the government. In reality, the term "public" refers to the availability of the corporation's shares to the general public. Government-owned entities are often referred to as "state-owned enterprises" or "public sector undertakings," depending on the jurisdiction.

While many public corporations are large, multinational entities, being publicly traded does not necessarily mean a corporation is large. Many small and medium-sized enterprises (SMEs) are also publicly traded, particularly in markets designed for smaller companies, such as the NASDAQ in the United States or the Alternative Investment Market (AIM) in the United Kingdom.

Another misconception is that all public corporations are profitable. The reality is that being publicly traded does not guarantee profitability. Public corporations, like private ones, can experience financial difficulties and even bankruptcy. The key difference is that public corporations must disclose their financial condition to the public, providing transparency into their performance.

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What Is a Public Corporation?

Public Corporation Explained

The Term Public Corporation in Different Legal Contexts

Common Misconceptions About the Meaning of Public Corporation

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