Business Studies: Company Ownership and Formation

Flashcards covering the benefits, challenges, legal requirements, and key documents involved in establishing and managing a company based on Business Studies Notes Paper 2.

Legal status (Company)

A company has its own legal status, trading name, and owns its own assets.

Shareholder liability

Shareholders have no direct legal responsibility for the company's obligations.

Dividends

The mechanism through which shareholders share in the profits of the company.

Board of directors

The qualified and competent group responsible for managing the company and pursuing growth opportunities.

Company Cash flow

Generally better than that of sole traders due to having more investors to fund the business.

Continuity of existence

The characteristic of a company where it has a life span that continues regardless of changes in ownership.

Tax rebates

Financial benefits a company may obtain if they are involved in social responsibility projects.

Notice of incorporation

A document that must be filed as part of the procedure for the formation of companies.

CIPC

The body where a company name can be reserved for a period of 6 months.

Memorandum of incorporation (MOI)

Serves as the constitution of a company, stating the rules by which the company is governed and describing the relationship with stakeholders.

MOI Auditor

One of the specific aspects that must be included in the memorandum of incorporation.

Incorporators

Individuals or entities that must be listed in the memorandum of incorporation.

Securities of the company

The financial instruments of the business that must be detailed in the memorandum of incorporation.

Prospectus

A written invitation to the public to buy the securities offered by a public company, providing information about the business.

Initial order offer (IPO)

When a company issues shares to the public for the first time, requiring the production of a prospectus.

Secondary offering

The offering of securities by a shareholder of the company rather than the company itself.

Primary offering

The offering of securities by the company itself, as opposed to a secondary offering by a shareholder.