Term 2 - Summaries (Public Co & State owned Company)

Question 1

Characteristics of a PUBLIC CO (LTD)

Answer 1

• JSE = Listed on JSE
• Difficult to START
• NAME = Limited (Ltd)
• SHAREHOLDING = any member of the public can
  be a shareholder
• SHAREHOLDERS = 1+
• Legal Personality
• CONTINUITY = Unlimited
• SHARES = issues shares to the public
• DIVIDENDS = Shareholders receive dividends
• PROSPECTUS
• TAX = Company tax (29%)

Question 2

What is the JSE?

Answer 2

Johannesburg Stock Exchange

Question 3

What is a PROSPECTUS?

Answer 3

Booklet issued once a year by the company (information about the company and its stock/shares)

Question 4

ADVANTAGES of a PUBLIC COMPANY (LTD)
Example: Vodacom Ltd

Answer 4

+ Raise LARGE amounts of capital
+ CONTINUITY = Unlimited
+ Legal Personality
+ ATTRACT = Good staff, pay good salaries
+ offer job security
+ Shares are transferable
+ Small investors become part of large organizations

Question 5

DISADVANTAGES of a PUBLIC COMPANY (LTD)

Answer 5

• Complicated and difficult to start
• If the company fails = lots of people
  unemployment
• Financial statements = must be made public

Question 6

STATE OWNED COMPANY (Example: ESCOM)
It is a legal entity. A SOE (State Owned Company) is listed in one of 3 ways. Name them.

Answer 6

1) Listed as a PUBLIC ENTITY
2) Listed as a PUBLIC FINANCE MANAGEMENT ACT
(example: Escom; Telkom; Transnet)
3) Owned by a MUNICIPALITY

Question 7

Characteristics of a SOE

Answer 7

*Generate its own income
* The state can remove all or most of the directors
* State can cast all or most of the votes at board
meetings
* Must appoint: audit,
social,
ethics committees
* Appoint an AUDITOR
* Appoint COMPANY SECRETARY

Question 8

ADVANTAGES of a SOE (State Owned Company)

Answer 8

+ Liability = limited
+ Support of GOVERNMENT
+ Greater power to negotiate contracts

Question 9

DISADVANTES of a SOE

Answer 9

• Government control
• ‘RED-TAPE’ - Time-consuming
• Strict regulations
• Difficult to raise capital