Public Limited Companies

Formation

• Membership is open to the public.
• Membership is by invitation through a prospectus.
• Formed by at least two shareholders and there is no upper limit.
• Governed by the Companies Act.
• The founding members have to draw up a prospectus, articles and memorandum of association and a statutory declaration and submitted to the Registrar of Companies.
• A certificate of incorporation is issued by the Registrar of Companies.

Control and Management

• Controlled and managed by the Board of Directors
• The Board of Directors is elected by the ordinary shareholders at an Annual General Meeting.
• The Board of Directors:
• Decide on the company’s policy.
• Choose a Managing Director (sometimes known as a Chief Executive Officer).
• The Managing Director is responsible for the day to day running of the business.
• Ordinary shareholders vote to decide on important matters and to pass resolutions.
• Annual accounts are audited and published in the press.

Liability

• The shareholders enjoy limited liability which means that:
• they do not lose their personal property in settlement of company debts and
• that they only lose amounts invested.

Disposal of profits

• Are distributed as dividends to shareholders.
• Can be set aside as a General Reserve.
• Can be ploughed back into the business ( Retained Earnings)
• Can be used to service loans.
• Can be invested into financial/stock markets to generate income.
• Is used to pay Corporate Tax.

Raising of capital

• Selling shares to members of the public.
• Issuing debentures to members of the public.
• Loans, overdrafts and mortgage finance from banks.
• Ploughing back some profits.
• Debt factoring.
• Leasing fixed assets.
• Hire Purchase
• Trade credit.

To access more topics go to the Commerce Notes page.