Types of companies (Tanzania Context)


Types of companies

A company may either be public or private and limited or unlimited.

Public and private companies
The Companies Act No. 12 of 2002 [section 3] defines a ''public company'' as a company limited by shares or limited by guarantee and having a share capital, and being a company the memorandum of which states that it is to be a public company. A public company should have no fewer than seven members but with no maximum number. Its shares may be issued to the general public and there is no restriction on the transfer of shares.

A private company is defined in the Companies Act No. 12 of 2002 [section 27] as one whose Articles includes the following aspects:

              (i)                    restricts the right to transfer its shares;
            (ii)                    limits the number of its members to fifty, not including persons who are in the employment of the company and persons who, having been formerly in the employment of the company, were while in that employment, and have continued after the determination of that employment to be, members of the company, and
          (iii)                    Prohibits any invitation to the public to subscribe for any shares or debentures of the company.

Limited and Unlimited Companies
A limited company may be either one having the liability of its members limited by the Memorandum to the amount unpaid on the shares held by them, known as a company limited by shares. It may on the other hand have the liability of its members limited to such amount as the members may undertake to contribute to the assets of the company in the event of winding-up, termed as company limited by guarantee.

An unlimited company is one not having any limit on the liability of its members. This type of company is not very common, as one specific advantage of forming a company is the limited liability of its owners/shareholders.

The focus of this chapter is on limited liability companies and whenever the term company is used it implies a company limited by shares.


Characteristics of a limited company

A limited company has certain attributes which distinguish it from other forms of business organization. Some of the distinguishing characteristics are discussed below:

Separate legal entity
A company is separate and distinct from its shareholders who are the owners. As a separate legal entity, a company may conduct its business operations with the same legal rights, duties and responsibilities as a person. For example, it has a right to own and possess land and property; a right to enter into contracts; a right to sue and be sued in its own name.

Limited shareholders' liability
As a separate legal entity, a company is responsible for its own acts and its own liabilities resulting from its business operations. The shareholders' liability is limited to the amount of contributed capital invested in the company.

Transferability of ownership
The ownership in a company is represented by shares which can easily be transferred from one shareholder to another without need for consent from other owners. This is especially true for public companies where trading of shares is done in a stock exchange.

Indefinite life
A company may continue in existence indefinitely when business is operating successfully. It is not affected by the changes in ownership or shareholders and therefore it has a more stable life.

Separation of ownership and management
It is usual for management of large companies to be delegated to a Board of Directors duly elected by the owners/shareholders. Besides the right to vote for the Directors, the owners/shareholders have no other involvement in the management of the company. However, small private companies may continue to have a major shareholder acting as Managing Director and other shareholders holding positions as directors or officers of the company. This aspect of separation of ownership and management has recently given rise to serious corporate governance problems

Comments

Post a Comment

Popular posts from this blog

What are the Misconceptions about employee motivation?

Image
Misconceptions about employee motivation In order for an employee to be motivated, depends on various factors such as level and status of the respective employee. There is no one principle to motivate all employees. There are some factors that are considered as motivating tolls for employees however in reality these may not be motivational. The followings are some misconceptions about employee motivation; 1.       Financial reward Money alone cannot generally act as a motivational tool for employees. Formal and informal recognition tends to add motivation for some employees rather than money. Money may tend only to motivate some employees in short term where an employee may be in high need for money. At some stage, i.e. senior level an employee may have enough money and therefore money may no longer motivate him/her. 2.       Natural motivation There is no such a natural motivation. No one can be motivated naturall...
Read more

Share capital, Invitation, Application, Allotment, calls and paid-up procedures

Capital of a limited company is divided into shares of a fixed amount . The amount stated in the Memorandum is known as the Authorized Share Capital . For example, this may be shs. 10 million divided into 100,000 shares of shs. 100 per share. This fixed amount per share is called its par or nominal value . A company may not issue share capital in excess of what has been authorized . The actual amount that has been issued to shareholders is termed Issued Share Capital . If in the above example only 80,000 shares have been issued, then the company's issued capital is shs. 8 million. The steps followed when a company issues shares are: Invitation The company invites the public to apply for its shares through a Prospectus which is an offer document that invites the public to subscribe and purchase shares of a company . A Prospectus gives objectives and information on attractiveness of the company. Application The public applies for shares in the company, usually...
Read more

CLASSIFICATION OF MANUFACTURING COSTS

CLASSIFICATION OF MANUFACTURING COSTS The three elements of production costs are materials, labour and expenses.   Each one may be categorized as either direct or indirect cost. Direct costs are those costs which may be identified with the product and therefore can be included directly in the cost of the product. These are costs that can conveniently and easily be traced to a particular product, department or any other object that costs are accumulated.   Examples are: (a) Direct materials - all materials that form an integral part of the finished product, like leather for shoes, wood for furniture, etc. (b) Direct labour - it is labour applied directly on the raw materials, in order to convert these into finished product. Like the wages paid to factory workers or machine operators engaged in the production process are classified under this category. (c) Direct expenses - are those specifically attributed to the product, like the royalty paid to an inve...
Read more