12 Questions
What are the disadvantages of a Private Limited Company regarding raising additional capital?
Cannot go to the general public for funds
How is decision-making affected in a Private Limited Company when many people are involved?
Can take a longer time to reach decisions and take actions
What must a company do with their annual financial report in a Private Limited Company?
Publish it with the Registrar of Companies
Why is it not easy for shareholders to sell their shares in a Private Limited Company?
Shareholders must get consent from others to transfer shares
What is the main characteristic of Public Limited Company shares in terms of ownership?
Shareholders have limited liability
How are Public Limited Companies able to raise capital?
Through borrowing from banks and offering shares to the public
What is the main characteristic of a Private Limited Company in terms of its financing?
Financed through issue of shares to family, friends, and employees but not to the General Public.
How many members must a Private Limited Company have by law?
Minimum of 2 members and a maximum of 50 members.
Why are shareholders more willing to invest in a Private Limited Company?
Shareholders have limited liability, so their risk is reduced.
What is the legal requirement regarding the name of a Private Limited Company?
The name must include the word 'limited' or 'Ltd'.
Why is continuity of business ensured in a Private Limited Company?
Because the business can continue even if one of the members leaves or passes away.
What is the role of the Registrar of Companies regarding Private Limited Companies?
The Company must be registered with the Registrar of Companies.
Study Notes
- Joint Stock or Limited Liability Companies: An association of individuals contributing capital for business operation, recognized as a separate legal entity.
- Types of Limited Liability Companies:
- Private Limited Companies: Financed through shares issued to family, friends, employees, and financial institutions. Shareholders have limited liability, must register with Registrar of Companies, minimum of 2 members, and accounting records must be kept.
- Advantages: Separate legal entity, more investors, limited liability, shared work and responsibility, and business continuity.
- Disadvantages: Cannot raise capital from general public, longer decision-making process, annual financial reports required, and difficulty selling shares.
- Public Limited Companies: Funded through borrowing, public offerings of shares, and retained profits. Shareholders have limited liability, a board of directors, and one vote per share.
- Shares: Units of ownership in a business.
- Ordinary Shares: Risk capital with variable dividends, holders have control and vote.
- Preference Shares: Fixed dividends and no control, holders have preference over ordinary shareholders.
- Debentures: Loans to the company with fixed interest rates, no ownership, and priority over shareholders.
- Public Limited Companies:
- Funded through various sources, limited liability, minimum of 2 members, and registered with Registrar of Companies.
- Advantages: Ability to raise large capital, easier borrowing, and potential for economies of scale.
Explore the characteristics and types of joint stock or limited liability companies. Learn about how these entities are recognized as separate legal entities and the differences between private limited companies and public limited companies.
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