Public company - what is it and how does it function?
The Commercial Companies Code regulates many types of companies. It turns out that this also applies to a public company, which - although to a lesser extent - is also described by the relevant provisions of this act. So what is a public company and what exactly does it operate on?
Definition of a commercial company
In accordance with the applicable regulations, we define a commercial law company every partnership or capital company, the formation, operation, dissolution, merger, division and transformation of which are governed by the Code of Commercial Companies.
In practice, we distinguish two basic categories of commercial companies:
partnerships - general partnership, partnership, limited partnership and limited joint-stock partnership;
capital companies - with limited liability and joint stock companies.
A civil law partnership does not belong to any of the above forms, as it is in fact a special type of obligation agreement. Its regulation can only be found in the provisions of the Civil Code.
What is a public company?
A public company is in fact a commercial law company, but it can only be a joint-stock company or a limited joint-stock partnership. Pursuant to Art. 4 § 1 point 6 of the Commercial Companies Code, such a company is defined as a public company within the meaning of the provisions on public offering and conditions for introducing financial instruments to an organized trading system and on public companies.
The Act on public offering and conditions for introducing financial instruments to an organized trading system and on public companies indicates to us that a public company is a company whose at least one share is admitted to trading on a regulated market or introduced to trading in an alternative trading system in the territory of the Republic of Poland
The possibility of operating in the form of a public company depends on having at least one so-called dematerialized share - it is a share recorded in an electronic form, which does not exist at all in a material form, i.e. in the form of a paper document. The main advantage of such actions is complete protection against loss, destruction or forgery.
How is a public company formed?
Establishing a joint-stock company or a limited joint-stock partnership is only the first step to creating a public company. It is necessary to go through the entire going public process here. For this purpose, the issuer of shares concludes an appropriate agreement with the National Depository for Securities - on its basis, the registration of shares that will be covered by the public offering in the depository is made. The next step is to submit an application for introducing the company's shares to trading on the main or parallel market (the letter is addressed to the management board of the Warsaw Stock Exchange). The management board then determines:
the date of the first listing of the company on the stock exchange;
the date of the trading session on which the first quotation will take place.
The first entry to the dance floor takes place as part of the IPO.
Public company - duties
Running a public company is always associated with more control and information obligations than in the case of an ordinary joint-stock company or a limited joint-stock partnership. Each public company is obliged to:
promptly provide information on the acquisition or possession of a significant block of shares, at the same time to the public, to the Polish Financial Supervision Authority and the company operating the regulated market on which the company's shares are listed, or to the entity organizing the alternative trading system in which these shares are listed;
simultaneous public disclosure to the Polish Financial Supervision Authority and the company operating the regulated market on which the shares of this company are listed, or to the entity organizing the alternative trading system in which these shares are listed, within 7 days from the date of the general meeting, the list of shareholders holding at least 5% of the number of votes at this meeting, specifying the number of votes each of the shares held and their percentage share in the number of votes at this general meeting and in the total number of votes;
publishing information on the current activities of a given company, including confidential information - unfortunately, this involves the opening of such a company, also in relation to potential competitors on the market.
Public company - a special right of a shareholder
Holding the status of a shareholder of a public company carries with it a special right, which is the right to compulsory buyout of shares. According to Art. 82 sec. 1 of the aforementioned Act on Public Offering, a shareholder of a public company who, independently or jointly with its subsidiaries or dominant entities, and entities that are parties to an agreement on directly or indirectly purchasing or taking up shares in a public company as a result of a non-public offering, reached or exceeded 95% of the total number of votes in this company is entitled, within 3 months of reaching or exceeding this threshold, the right to demand that other shareholders sell all their shares.
Judgment of the Provincial Administrative Court in Warsaw of September 24, 2008 (file reference number VI SA / Wa 301/08)
A stock exchange shareholder in a public company enjoys the rights of a party in civil law relations between him and the company, but does not have the rights of a party in administrative proceedings.
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Public company - why create it?
A public company is certainly an additional burden for its members. On the other hand, it guarantees obtaining capital to conduct specific activities straight from the stock exchange. The undoubted benefits of a public company are therefore:
favorable conditions for obtaining capital for the development of the enterprise;
the prestige and credibility of the company on the market;
greater opportunities to promote the company and the products or services it offers;
the possibility of an objective valuation of the company's assets.
However, the desire to publish a joint-stock company or a limited joint-stock partnership is associated with certain risks and obligations that must be met. They mainly include:
the initial costs of listing the company on the stock exchange may be quite high, so it requires the preparation of an appropriate business plan and estimation of the company's financial capabilities;
long waiting period for funds for the company;
frequent (and sometimes large) fluctuations in share prices on the stock exchange;
limiting the powers of the current owners of the company;
transparency of activities that may potentially threaten the conducted activity on the part of competitors.
Public company - summary
Currently, joining public companies (listed companies) is quite difficult - all because of the formal requirements for new entrepreneurs, mainly in terms of the initial capital that allows them to start operating on the stock exchange. Regardless of this, however, a public company may be any joint-stock company or limited joint-stock partnership that will pass through the so-called going public and will have unregistered shares. The establishment of a public company depends on the conclusion of an agreement with the management board of the National Depository for Securities.