Assessment 1-Limited Companies Revison

Question 1

What is a Memorandum of association?

Answer 1

The Memorandum of Association is needed to form a plc. It states;
•The company’s name
•The address of its registered office
•It states that the shareholders will have limited liability
•The amount of share capital to be raised
• The purpose of the company

Question 2

Name what the Articles of Association states

Answer 2

The articles of association is needed to form a plc. It states;
• The names of the directors in the company and their role
•How the profits will be distributed
•The internal rules for running the business, such as rules about meetings and the voting rights of the shareholders
• The procedures to be followed at the AGM (Annual General Meeting)

Question 3

What is a Certificate or incorporation?

Answer 3

This is issued to show the company has a separate legal existence from its owners and can act independently.

Question 4

What is a prospectus?

Answer 4

Before shares can be sold the company issues a prospectus which gives details of the company’s plans and its hopes for the future. It helps investors decide whether to buy shares in the company or not

Question 5

What is a trading certificate?

Answer 5

A trading certificate is issued when the Registrar is satisfied that the company is in the position to start trading.

Question 6

Name three advantages of an Ltd (Private Limited Company)

Answer 6

• Limited liability- You only owe what you have invested into the company and your personal belongings are safe
• The company can raise extra capital by selling more shares in the company and thus giving it more of an opportunity to expand
• The Private limited company has its own legal status, separate from its shareholders. It can be sued and own its own property.

Question 7

Name three disadvantages of an Ltd (Private limited company)

Answer 7

• Shares are not available to everyone-Only family and friends. Expansion may be difficult
• Setting up an Ltd is a lengthy process compared to being a sole trader or partnership
• Some of the financial information is available to public inspection

Question 8

Name three advantages of a Plc (Public limited company)

Answer 8

• The shareholders have limited
• It is easier to raise capital as shares are available to the public
• Banks are a lot more willing to lend money to PLC’s

Question 9

Name three disadvantages of a Plc-Public limited company

Answer 9

• Forming a Plc involves a lengthy process-cost time and money. £50000 needs to be in the business bank account
• Plc’s can be so large that employees feel out of touch with management/directors
• Decision making can be slow because of all the people to be consulted