Public Company

A public, publicly traded, publicly held company, or public corporation is a corporation whose ownership is dispersed among the general public in many shares of which are freely traded on a or in over the counter markets. In some jurisdictions, public companies over a certain size must be listed on an exchange.

The first company to issue shares is generally held to be the Dutch East India Company in 1601, but quasi-corporate entities, often trading or shipping concerns, are known to have existed as far back as Roman times.

Usually, the securities of a publicly traded company are owned by many investors while the shares of a privately held company are owned by relatively few shareholders. A company with many shareholders is not necessarily a publicly traded company. In the United States, in some instances, companies with over 500 shareholders may be required to report under the Securities Exchange Act of 1934; companies that report under the 1934 Act are generally deemed public companies.

Publicly traded companies are able to raise funds and capital through the sale (in the primary or secondary market) of shares of . This is the reason publicly traded corporations are important; prior to their existence, it was very difficult to obtain large amounts of capital for private enterprises. The profit on stock is gained in form of dividend or capital gain to the holders.

The financial media and analysts will be able to access additional information about the business.

The owners are able to share risks by selling shares to the public. If he holds 100% of the share, he will pay all the debt, however, if he holds 50%, he only needs to pay 50% of the debt. It increases the asset liquidity and the company does not need to depend on fund from the bank. It improves the transparency of company information by releasing annual account report and transaction record. The company may be better known to the public,or increase its popularity. If some shares are given to the managers, the conflicts between managers and shareholders, the principal-agent problem, will be remitted.

Many stock exchanges require that publicly traded companies have their accounts regularly audited by outside auditors, and then publish the accounts to their shareholders. Besides the cost, this may make useful information available to competitors. Various other annual and quarterly reports are also required by law. In the United States, the Sarbanes–Oxley Act imposes additional requirements. The requirement for audited books is not imposed by the exchange known as OTC Pink. The shares may be maliciously held by outside shareholders and the original founders or owners may lose benefits and control. The principal-agent problem, or the agency problem is a key weakness of public company. The separation of company's ownership and control is especially prevalent in such countries as U.K and U.S.

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