Quasi Public Corporation: Everything You Need to Know
A quasi public corporation, sometimes referred to as a public service corporation, is a private corporation that is backed by a government agency that has a public requirement to provide certain services. 3 min read
Quasi Public Corporation
A quasi public corporation, sometimes referred to as a public service corporation, is a private corporation that is backed by a government agency that has a public requirement to provide certain services. Most quasi public corporations begin as government agencies, but thereafter branch off on their own, becoming a separate entity.
Such corporations, while quasi public, can still offer shares to the public and have investors involved to help gain capital for the business. Therefore, the quasi public corporation operates similar to an ordinary private corporation in that it will file the articles of incorporation and elect a board of directors. In turn, the board of directors will hire officers to oversee the daily operations of the business. The company can also issue shares of stock to the public on any major stock exchange.
But unlike a private corporation that operates primarily to benefit the shareholders, the board of directors in a quasi public corporation has a dual responsibility of carrying out the public purpose of the company and obtaining a profit for shareholders. While there is a dual responsibility, the main goal is to achieve the company’s public purpose over obtaining a profit for the shareholders of the corporation. Therefore, investors might be a bit hesitant about investing their money to help the corporation, as they might believe that their goals are not going to be met. However, investing in a quasi public corporation comes with very little risk due to the fact that, if the business isn’t making a profit, the company will be backed by one or more government agencies who will ensure that the corporation continues running and making a profit.
Similar to a public-purpose corporation, the quasi public corporation is initially established to benefit the public, but operates as a private company. The company is partially funded by the government to help expand or enhance the public purpose that the government agency wants to develop.
Some examples of a quasi public corporation include telecommunications, oil, gas, and electric lighting companies. Such entities have greater flexibility and fewer restrictions than ordinary private corporations because of the public policy purpose.
What Type of Money is Funded by the Government?
The government will generally fund the corporation for its continued existence while also providing funding if the company experiences persistent losses. Such losses might be due to lack of capital from investors, reduction in the price of shares, lack of sales on goods, or even lack of oversight by the board of directors and officers of the corporation.
Some private corporations might also become quasi public corporations after a government agency reaches out indicating that it wants to provide funding to the company and promote a public activity, i.e. scholarships to those unable to afford college. Since the government agency would ordinarily have additional steps to go through to donate funds to a private company, there will be less administrative duties on the part of both parties if the private corporation converts to a quasi public corporation.
Examples of Quasi Public Corporations
Some examples of quasi public corporations include the following:
- Sallie Mae
- Fannie Mae
- Communications Satellite Corporation (“COMSAT”)
- U.S. Postal Service
Sallie Mae was established to provide student loans to students. It was initially established as a government entity that serviced federal student loans. After some time, however, it converted to a quasi public corporation. Another example is Fannie Mae, also known as the Federal National Mortgage Association, which operates as an independent corporation under a congressional charter that provides help to those wishing to become homeowners. Fannie Mae encourages mortgage lending by purchasing mortgages that are insured by the Federal Housing Administration. COMSAT is another example; this company is backed by the U.S. Congress to enhance space development. The U.S. Postal Service is also a quasi-public corporation that operates as an independent agency of the U.S. federal government.
Quasi Public Corporation Employees
Employees of such corporations are not considered government employees but are rather private employees for the company. Even the board of directors and officers are considered employees of the corporation and not federal or state government employees.
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