Limited companies and multinationals Flashcards
Features of limited companies
- Incorporated business
- Limited liability
- Owners are shareholders
- Run by BOD headed by chairperson
- Raises capital by selling shares
- Pay corporation tax
- Formation requires Memorandum and Articles of Association
Purpose of AGM
- shareholders meet once annually to discuss progress of co.
- vote on company decisions
- vote in/out directors on BOD
Certificate of Incorporation
Legal document required by a new ltd. company before they can begin trading. Received if documents sent to registrar are acceptable
Memorandum of association
Sets out constitution and details about company, states:
- name of company
- name and address of co.’s registered office
- nature of activities and objectives
- amount of capital to be raised and no. of shares to be issued
Articles of association
Internal running of the business, states:
- rights of shareholders depending on type of share held
- procedure for appointing new directors
- length of time directors should serve
- arrangements for auditing
- timing and frequency of meetings
Private limited company (ltd)
small/medium-sized company limited by shares that trade shares privately, has Ltd after name
Features of private ltd cos
- shares are not traded on stock market, transferred privately from 1 individual to another
- often family businesses
- directors are shareholders that are involved with running bus.
Advantages of private limited companies
- control cannot be lost to outsiders
- limited liability
- business continuity
- more owners contributing to capital
- more status than smaller businesses
Disadvantages of private limited company
- takes time to transfer new shares
- financial info is published
- high administration costs, takes time to set up
- profits shared among more members
- cannot raise huge amounts of capital like PLCs
Public limited company
Limited company whose shares are freely sold on stock exchange with min. share capital of 50000 pounds and the letter PLC after its name
Going public (flotation) is expensive because
- lawyers are needed to ensure prospectus is legally correct
- prospectus is printed and circulated
- bank is paid to process share applications
- minimum 50000 pounds share capital
- underwriter must be paid (insure against possibility of unsold shares)
- high administrative and advertising expenses
Advantages of PLC
- large amounts of capital can be raised
- unlimited liability
- shares are bought and sold very easily
- can exploit economies of scale
- can dominate the market
- high profile in media/brand visibility
Dsiadvantages of PLC
- control can be lost to outsiders
- flotation expenses are very high
- more financial info is made public
- more remote from customers
- more regulatory control
- managers may take control rather than owners (larger organisational structure)
Multinational
company that carries out significant production or operations in at least 2 different countries
Features of multinationals
- huge assets (machinery, land equipment) and turnover- extremely well resourced and can afford to take on large scale contracts/project that smaller businesses couldn’t cope w
- highly qualified and experienced professional executives and managers- can afford to hire very best of people from anywhere in the world
- powerful marketing and advertising capability- can afford to invest in impressive advertisement campaigns to outcompete smaller rivals
- highly advanced and up to date tech- can afford to keep up to date with tech developments to have the most efficient equipment and lower costs
- influential economically and politically- very powerful, can set market prices and even influence government decisions
- efficient due to economies of scale- so large they can reduce costs significantly by buying raw material in bulk for eg.
- ownership and control centred in home country- profits always returned there
