Limited Companies

1. Limited Companies • Companies sellshares to raise capital. • The owners of a company are known as Shareholders. • Companies are run by a Board of Directors on behalf of shareholders. • There are 2 types of companies • Private limited companies, eg Baxters Ltd Arnold Clark Ltd • Public limited companies, eg Marks & Spencer plc Celtic plc

2. Legal Requirements…. • Ltds and Plcs must be registered at Companies House • 2 Documents required to do this: • Memorandum of Association - states the name of the business - its registered address • Articles of Association • states the aims of the business and how it will be run • A list of the directors

3. ADVANTAGES Sell shares privately (must be invited to become a shareholder) Ownership can be restricted to small group of shareholders or family members Allows firm to expand quicker Shareholders have Limited Liability They can employ specialist managers DISADVANTAGES Shares cannot be sold on the Stock Market Limitations on capital Accounts must be disclosed to shareholders Profits are shared - Shareholders receive dividends which is their share of the profits More complex and expensive to set up Ltds must be registered at Companies House Private Limited Company (Ltd) Baxters Ltd is still owned and controlled by members of the Baxter family

4. ADVANTAGES Shareholders have Limited liability Easy to raise large sums of capital Allows firm to expand quicker They can employ specialist managers DISADVANTAGES Expensive to form a plc Problems being ‘too’ large, eg slow decision making Control can be lost to other shareholders Accounts must be made public Public Limited Companies There can be many thousands of shareholders in a plc

5. DIVIDENDS PERKS GAINS POWER Shareholders • People who buy shares in a company are known as shareholders • They are part owners of the company • They get dividends every year based on the number of shares they own • The value of their shares may increase or decrease • They have the right to attend the AGM and the power to vote on matters affecting the company • They often received perks from the company eg, discount on goods or services

6. Board of Directors The Board of Directors are appointed by the shareholders to represent their interests The Chairperson is often the shareholder with the greatest number of shares They are responsible for taking all the major decisions regarding the company Company Secretary Managing Director Chairman

7. Multinationals Multinational companies are very large organisations which operate in several countries and are often able to control prices and even influence governments USA GB ARGENTINA FRANCE JAPAN RUSSIA AUSTRALIA

8. Private Limited Company - Questions • Explain what you understand by the term “Shareholder” • Name the 2 documents that are required to become a Private Limited Company. • Outline the contents of each of the documents named above. • What is the role of the Board of Directors in a Limited company? • How would a private limited company introduce a new shareholder? • You have been approached by your friend who is currently in business as a sole trader. He/she wants to expand the business. Outline the advantages and disadvantages of becoming a private limited company. 7. Design a poster outlining what you know about Private Limited Companies. Include a definition, advantages and disadvantages, shareholders and the role of the Board of Directors. Give examples of companies that are Ltds.