Company Accounts Flashcards
What are the two types of limited company?
A private limited company
A public limited company
Give the definition and features of a Private Limited Company.
This type of company cannot sell its shares on the stock market. It is privately owned and shares can only be sold to relations, friends and employees.
It is recognised by the initials Ltd after its name.
A minimum of 1 shareholder is required to register private company in the UK. However there is no upper limit to the number of shareholders a company can have during or after company formation.
It does not have to publish its annual financial statements.
Give the definition and features of a public limited company.
This is a company which can sell its shares on the stock market to the public.
They are recognised by having plc after their names.
There is no limit to the number of shareholders it may have.
They must publish their annual financial statements.
Advantages of a public limited company.
All shareholders in a plc benefit from limited liability.
Equity can be raised by selling shares on the stock market.
A plc had a legal identity distinct from shareholders and is unaffected by changes in ownership.
What are the disadvantages of a public limited company.
The setting up of a plc is determined by numerous legal regulations.
A PLC must publish its financial statements.
The provision of the companies acts restricts the activities of the PLC.
Shareholders in a PLC are not guaranteed a return on their investment in times of profit.
During the formation of a PLC what are the two documents which must be lodged with the registrar of companies?
When setting up a company, upon its formation, you must lodge the following 2 documents with the Registrar of Companies:
Memorandum of Association
Articles of Association
What is a memorandum of association?
This document deals with the external regulations for the management of the proposed company.
What does a memorandum of association include?
It will include the following piece of information:
The Name of the company (to include PLC if appropriate)
Address in the UK of the Registered Office eg Companies House in Edinburgh if it’s a Scottish Company.
Statement that the liability of its members is limited.
Details of the intended amount of Share Equity and types of shares eg Preference/Ordinary.
A Statement of its objectives.
What is an article of Association?
This document deals with the internal regulations for the management of the proposed company and is subordinate to and controlled by the Memorandum of Association.
What does an article of association include?
It will include the following piece of information:
The raising of equity/ share allotment/borrowing powers.
Directors remuneration/powers.
Holding of company meetings.
The rights of shareholders.
What does an article of association include?
It will include the following piece of information:
The raising of equity/ share allotment/borrowing powers.
Directors remuneration/powers.
Holding of company meetings.
The rights of shareholders.
