i have missed the first part of the syllabus which is named professional institutions. so i have to work hard and study for that part as these are all therotical it will be harder to understand these points if i dont study them now.
today the class started with the topic of ORGANIZATIONS. this was quite interesting to me as i've covered many of the topics in CIMA business law subject.
organizations can be defined as group of people working together to achieve a common goal. there are two main types of organizations,
- Commercial - (these type of organizations do business with a profit motivation, most of the time selling products and services)
- Non Commercial ( these are probably having a motivation of social and economical value. there are several types of examples available for this type of organizations)
in order to start new commercial organization in UK you have to follow the legislation of Companies Act 1985. and as in sri lanka you have to follow the New Companies Act 2007. but for non-commercial organizations in UK the approval process is still handled by queen as a tradition. but that Royal Charter State will not be given to non-commercial organizations if they dont prove their comitment beyond reasonable doubt to approving council (privy council).
under companies act of UK there are 3 types of companies that you can start.
- Sole Proprieter
- Partnerships
- Registered Companies
Sole Proprieter
there are not many formal documents and formal procedure in starting an sole proprieter business. but there is no seperate legal existance for this type of business, so the owner of the company is personally liable for all its liabilities.
Partnerships
Partnerships are those where couple of people start working in a group to achieve a common goal. the arrangement for this can be in written or verbal. the problem in partnerships is that all contracts should be signed by a all of the mebers in a partnership and every member is unlimitedly liable for that partnership. all most all of the commercial partnerships among people fail because sharing revenues always become a critical factor. but proffesional partnerships such as with lawyers and GPs are likely to be successful as there is no sharing of invesment or revenue in that. it is all about sharing their client base with members of that partnerships. the no of members for a partnership must be of 2-20 and when the ownership changes the law will treat it as a new partnership so all those important documents should be revised again. and every member in a partnership is having the management powers and the power to act as a agent of that partnership.
Registered Companies (limited liability)
with this type of organizations we can give a seperate legal existance for the comapany which we are starting. so in that case there will be no liability on companies owners and the management to the company it self. the maximum liability of a given shareholder for that paticular company is the money he/she have invested in that company. there are two types of companies which can be formed under registered companies.
- Private Limited Companies (PVT)
- Public Limited Companies (PLC)
Private Limited Companies
in this formation there have to be a minimum of 2 and maximum of 50 shareholders. and the ownership is decided by the no of equal shares they own. but there are some restrictions placed in private companies by its constitution.
- private companies cannot offer shares or debentures to public.
- when the ownership of shares change first it should get approved from the board of directors.
- maximum no of share holders cannot exceed 50.
Public Limited Companies
public limited companies dont have those three restrictions which were in private limited companies, but in a public limited company there should be a minimum of 7 shareholdes.
limit of a liablity of a shareholder towards company debts are controlled in three ways.
- limited by shares (shareholders liability is limited to the amount they have invested)
- limited by guarantee (members agree to pay a small equal amount in any case the company wound up)
- unlimited ( every share holder is personally liable for all company debts)
