Cambridge AS A Level Business Studies/ ZIMSEC Advanced Level Business Studies/ Business Enterprise Skills Notes: Types of businesses: Limited Companies: Articles
- We have already looked at the nature of limited liability companies and what makes them unique
- Unlike Sole Trader business, companies require a lot of paperwork in order to create them
- Only when all the required paperwork is completed can a company be incorporated and start operating
- Some of the documents you need to be aware of include the following:
Memorandum of Association
- It governs the relationship between the company and the rest of the world.
- It states the name and address of the company,
- its objectives, country of registration and
- the name of the directors.
Articles of Association
- They are known as The Articles of Association
- It is a document which governs the company’s internal operations.
- It details such matters as the name of the company,
- the procedure for calling an Annual General Meeting,
- the voting powers of shareholders,
- the procedure and tenure of directors,
- the responsibilities of directors,
- The objectives of the company,
- classes of shares,
- dividend policies and liquidation procedures.
Certificate of Incorporation
- Once the Registrar of companies is satisfied with the contents of the above documents
- He issues the company with a certificate of incorporation
- It is a legal document indicating that the state government has officially recognized a business or other entity as a corporation.
- It is like a birth certificate to the company to which it is issued.
- Once issued with a certificate of incorporation, a Private Limited Company can start trading immediately.
- A Public Limited Company meanwhile has to issue a Prospectus.
- A legal document in which a Public Limited Company invites the public to buy shares and invest in the business.
- Once, it has raised enough capital a Public Limited Company is issued with a Certificate of Trading
- This authorizes the business to start trading.
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