A public company is formed by floating the shares of the company in the market. It needs to be mentioned in this regard that for a company to become public, it has to be registered in one of the stock exchanges. The reason why it is mandatory for a company to get registered on the stock exchange is that it would allow the public to buy the shares of the company, and also sell them. One of the reasons why companies intend to become a public enterprises is because it allows them to attract funds and capital. It accumulates funds by selling its shares in the market. The shareholders are essentially the stakeholders of the company, however, they’re certainly not the owners. The shareholders have a significant role to play in forming the board members of the board of directors of the company. It is the board of directors that appoints various individuals in important positions like managers, chief engineering officers, vice president, and others, who are interested in carrying out day-to-day operations of the business.
Transparency needs to be maintained.
In the case of a public company, the money of common people are invested in it and stop therefore, in the United States, in most countries, it is mandatory for the companies to release their financial statement on an annual basis so that the shareholders get a clear view about the financial situation of the company. Besides, it is also essential to run an annual audit, so that a true and fair view of the financial condition of the business is established. In the case of a public company, it is also essential to maintain a lot of legal formalities and abide by certain protocols that have been laid down by the authorities. The fact that a lot of public money is involved, makes it mandatory for the companies to maintain a certain degree of transparency so that any kind of confusion or attempts to adopt unfair means could be avoided.
Who determines the value of the shares?
When it comes to determining the value of the shares, it is up to the company to decide. However, before taking a certain amount, the companies need to run a valuation of their assets, goodwill, and various other aspects. Nobody would invest their money in a company, which is not performing well or showing signs of closing down. Though there are companies of this status, that still has a listing on the stock exchange, however, the price of the shares is way too less compared to some of the corporate giants.
Where to buy the shares from?
For anyone, who is planning to invest in a public company, for him it is a stock exchange where he can get hold of the shares. However, as mentioned, buying a certain number of shares does not make an individual the owner of the company. He certainly has a stake in it, however, it is a board of directors who holds a key position in making important decisions.
These are some essential features that a public company needs to possess. As the name suggests, the ownership of a public company is not restricted to a few individuals. By buying shares, even the common public can get a part of that ownership. It needs to be mentioned in this regard that though most of the shares of a public company are sold and bought in public markets, this does not essentially mean that all the individual shareholders have control over the company. The shareholders have the right to vote and select the Board of Directors, who in turn would hire experts to carry out day-to-day operations.