(4) Limited companies and multinationals

Question 1

What are the features of limited companies?

Answer 1

• The owners have limited liability.
• The business raises capital via selling shares.
• The shareholders elect directors to run the company.
• They pay corporate taxes.

Question 2

What are the two documents a limited company needs to produce in order to receive a certificate of corporation?

Answer 2

1) Memorandum of association.

2) Articles of association.

Question 3

What does the memorandum of association contain?

Answer 3

• Name of the company.
• Name and address of the company’s registered office.
• Objectives of the company.
• Amount of capital to be raised.

Question 4

What does the article of association contain?

Answer 4

• Rights of shareholders.
• Procedures for appointing directors.
• Timing and frequency of company meetings.
• Arrangements for auditing company accounts.

Question 5

What’s special about private limited companies?

Answer 5

• Their business name ends in Ltd.
• Shares can only be transferred privately.
• The directors of these firms tend to be shareholders.

Question 6

What are the advantages of private limited companies?

Answer 6

• Limited liability
• More capital can be raised
• Control can’t be lost.
• Business continues, even if the owner dies.

Question 7

What are the disadvantages of private limited companies?

Answer 7

• Financial info has to be public.
• Costs money and time to set up.
• Profits are shared between members.
• Can’t raise huge amounts of money.

Question 8

What are public limited companies?

Answer 8

They are bigger than private limited companies, and their shares can be bought and sold in the stock exchange.

Question 9

Why is it expensive to go public?

Answer 9

• The company needs lawyers to check the prospectus.
• The prospectus has to be printed and circulated.
• A bank has to be paid to process the share applications.
• A fee should be paid to an underwriter.
• The PLC must have a minimum of 50,000 pounds in capital.

Question 10

What are the advantages of being a PLC?

Answer 10

• Large amounts of capital can be raised.
• Limited liability.
• They can exploit the economies of scale.
• Shares can be bought and sold easily.

Question 11

What are the disadvantages of being a PLC?

Answer 11

• Set up costs can be very expensive.
• Outsiders can take control by buying shares.
• More financial info should be made public.

Question 12

What is a multinational?

Answer 12

It is a large business with significant production or service operations in at least two countries.

Question 13

What are the features of multinationals?

Answer 13

1) They have huge assets
2) The have highly qualified and experienced executives managers.
3) Powerful advertising
4) Highly influential politically and economically.
5) Can exploit huge economies of scale.