Accounting Unit 1 Types of Corporations Group Members: Chevannese Ellis Syee Dassado Joel Trowers General Introduction A corporation is a legal entity that is separate and distinct from its owners. Under certain laws, a corporation possesses many of the same rights and responsibilities as individuals. They can enter contacts, loans and borrow money, sue and be sued, hire employees, own assets, and pay taxes. Definition Of Statutory Corporation A statutory corporation is a statute created by the government. Their precise nature varies by jurisdiction; thus, they might be ordinary companies/corporations owned by a government with or without other shareholders. This is a body corporate created by the legislature with defined powers and functions and is financially independent with a clear control over a specified area or a particular type of commercial activity. Advantages Of Statutory Corporation 1. Expert Management- It has the advantages of both the departmental and private undertakings. 2. Internal Autonomy- The government has no direct interference in the day-to-day management of these corporation. Decision can be taken promptly without any hindrance. 3. Responsible to Parliament- Statutory organizations are responsible ID. Their activities are watched by the press and the public. 4. Flexibility- As these are independent in matters of management and finance, they enjoy adequate flexibility in their operation. 5. Easy to Raise Funds- Being government-owned statutory bodies, they can easily get the required funds by issuing bonds, etc. Disadvantages of Statutory Corporation 1. Government Interference- the greatest advantage of a statutory corporation is indeed its independence and flexibility, but it is found only on paper. 2. Rigidity- The amendments to their activities and rights can be made only by parliament. This results in several impediments in the business of the corporations to respond to the changing conditions and make decisions. 3. Ignoring Commercial Approach- The statutory corporations usually face little competition and lack motivation for good performance. Hence, they suffer from ignorance of commercial principles in managing their affairs. Examples of Statutory Corporations in Jamaica Jamaica National Heritage Trust Bank of Jamaica National Housing Trust Examples of Statutory Corporation in Jamaica are the Jamaica National Heritage Trust and the National Housing Trust. Central or state bank of any country are usually a statutory corporation. Definition Of Public Limited Company A Public Limited Company is a voluntary association of members that are incorporated and therefore has separate legal existence and the liability of whose members is limited. Public limited companies are listed on the stock exchange where their share/stocks are traded publicly. Features of Public Limited Company 1) A minimum number of subscribers: At least 7 persons must subscribe to the memorandum to incorporate a public company. 2)Limitless on the number of members- There is no ceiling on the maximum number of members in a public company. 3)Transfer of shares Is not restricted - A public Company has no restriction on the transfer of shares, hence they are freely transferable. Advantages Of Public Limited Company 1) Raising Capital through the issue of shares -The most advantage of being a public limited company is the ability to raise share capital, particularly where the company is listed on a recognized exchange. 2) Widening the shareholder base and spreading risk - Offering shares to the public gives the opportunity to spread the risk of company ownership among a large number of shareholders. 3) Other finance opportunities- Banks and often financial institutions may be more willing to extend finance to a public limited company, particularly one that is listed. The company could also be in a better position to negotiate favorable interest rates and repayments terms on loans. Advantages Of Public Limited Company(Conti.) 4)Prestige Profile and Confidence - Whether observed or not having ‘PLC' at the end of a company name can add standing and prestige. There is a sense of status about the public limited company its private company counterpart just doesn't quite have, which can affect how the business is viewed. While often more imagined than real, this perception of being more established, larger, or more powerful can affect the behavior of customers, suppliers, and employees. 5) Separate legal entity - The separate legal entity between the company and its owners is another attractive feature of a limited company. Disadvantages of Public Limited Company 1. Regulation - Limited liability companies are subject to very comprehensive legislative regulation. This makes the operation of the entity more tedious, formal and restricts flexibility in terms of company management. 2. Initial Financial Commitment is higher - The minimum financial commitment is higher for a public limited company than for a private limited company. In order to trade, The PLC must start with at least £50000 of normal share capital, at least 25% of which is paid up. That means at least £ 12500 must be committed to the business, whereas in a private company a single share of £0.01 could be allowed and not paid for an issue. 3. More vulnerable to takeovers - At worst, a company can become vulnerable to a hostile takeover if a majority of shareholders agree to bid. Disadvantages of Public Limited Company(Conti.) 4. Ownership & Control issues- With a public limited Company, it's much harder to control who is a shareholder of the company and who the directors are ultimately accountable to. There is therefore a possibility that the original owner(s) or directors can lose control of the direction of the company, face disputes, etc. Examples of Public Limited Companies in Jamaica LASCO Grace Kennedy National Bakery Definition Of Private Limited Company A Private Limited Company is a company which is privately held for small businesses. The liability of the members of this company is limited to the number of shares respectively held by them. Shares of this company cannot be publicly traded. Features of Private Limited Company 1) It is not required to submit annual financial reports. 2) The transferability of shares is restricted by its articles. 3) The number of shareholders is limited. Advantages Of Private Limited Company 1. A private company is not obligated to reveal financial reports at any time to the public, thus eliminating the disclose of business details that might put the firm at a competitive disadvantage. 2. No minimum capital is required to form a Private Limited Company. 3. Perpetual Succession – The company continues to operate even in the case of death or bankruptcy of any owners. Disadvantages of Private Limited Companies 1. It cannot issue shares to the public. 2. Capital is less than public limited since they quote their shares on the stock market. 3. The number of shareholders, in any case, cannot exceed 50. Warm up After Activity State whether it is statutory, public and private corporation 1. Which corporation’s shares are freely transferrable on the stock exchange? 2. What document a prospective limited company receive as an award before they are eligible to trade as a legal entity? 3. Which corporation shares are not freely transferable and restricted? 4. Which corporation has no significant competition in there market and is heavily observes by people in high power? References https://www.iedunote.com/statutory-corporation https://en.m.wikipedia.org/wiki/Statutory_corporation https://ebizfiling.com/blog/advantages-and-disadvantages-of-private-limitedcompany/ https://smallbusiness.chron.com/advantages-being-private-company-20236.html https://www.youtube.com/watch?v=xo3Y4yfec30 https://www.investopedia.com/terms/p/plc.asp https://www.bbc.co.uk/bitesize/guides/zdc6mfr/revision/4 https://www.tutor2u.net/business/reference/public-limited-companies The END~ Thanks! Do you have any questions? addyouremail@freepik.com +91 620 421 838 yourcompany.com CREDITS: This presentation template was created by Slidesgo, including icons by Flaticon, infographics & images by Freepik. Please keep this slide for attribution
