Econet is an example of a PLC

Econet is an example of a PLC

ZIMSEC O Level Commerce Notes: Business Organisations: 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.

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