Defining and Classifying Public Companies: Evolution and Market Trends

Evolution of Public Companies

In its first stage, public companies were characterized as being very similar to autonomous bodies.

After the Spanish Civil War and World War II, there was strong growth of public enterprises. At this time, they gradually started to act under private law.

In this second stage, public enterprises resembled corporate public entities.

In a third stage, the liberalization of public enterprises began, leading them to become stock companies.

Defining Public Companies and Legal Requirements

The definition of a public company in EU law depends solely on its duties.

Requirements for Public Company Status

The requirements to become a public company are:

1. They must be created by Public Administration (AA.PP) entities or other entities created by them.
2. They should be mainly financed by public entities.
3. Their activity must be under the control of public entities.
4. Management or surveillance boards should be integrated by more than half of members appointed by public entities.

Major Trends Affecting Public Companies

Two major trends regarding the public company are:

Trend 1: Public Sector Expansion (Nationalization, etc.)

This trend encompasses nationalization, regionalization, provincialization, and municipalization.

Forms of Nationalization

Nationalization, at first, is the exclusion of foreign capital from a certain economic sector, which often involves expropriation (payable to the owners, who are foreign in this case).

Publification is another way, involving the exclusion of foreign capital in sectors where it has not yet entered, i.e., in emerging sectors.

The next way is to exclude foreign private capital in certain sectors.

The last form of nationalization is buying private sector companies and practicing business in free competition.

Regionalization, Provincialization, and Municipalization

In autonomous sectors, the process is known as regionalization. Both regionalization and nationalization are governed by statute.

In the case of provincialization and municipalization, in the absence of a local parliament, they are governed by an agreement approved by an absolute majority by the local and/or provincial authority.

Trend 2: Privatization

Privatization is the process opposite to nationalization. It involves the transfer of public enterprises to the private sector.

When a company is privatized (meaning 51% or more of the capital is private), it ceases to be an institutional administration entity.

The Current Intermediate Trend: Regulation

The current trend is an intermediate stage: regulation. This involves private companies operating with government guidelines, but without direct public financial support.

Classification of Public Enterprises

• Public Entity
• Publicly Owned Commercial Companies:
  • State
  • Local
• Foundations