The Business Units In Commerce (Companies)

The Business Units In Commerce (Companies)

COMPANIES – These business units have their capital divided into shares which are held by the owners, or shareholders, who receive profits distributed to them in proportion to the number of shares they hold. Companies have a legal existence of their own which means that if the owners die the shares can be sold and the business remains in being.

It is usual, as in Nigeria, for sole-owner and partnership concerns, known as unincorporated businesses, to outnumber companies of the incorporated businesses. Among the latter are the biggest and most important firms, in terms of the size of their output and numbers of employees.

Private limited companies

Firms may start off in this form or a sole-owner or partnership firm can transform itself into this as long as it meets the necessary criteria, the basic features of which are:

1. Between two and 50 shareholders are allowed. More owners can provide capital than in a partnership but such firms are still generally fairly small in scale with powers of ownership concentrated among a small group of people, often a family.

2. All shareholders enjoy limited liability. This encourages people to invest in companies as they know that their private assets will be safe.

3. Shareholders elect directors to run the business. In private companies they are usually fellow owners.

4. Shares cannot be sold publicly nor without the consent other shareholders. Thus a family firm could not be taken or bought out without the family’s approval.

5. A number of legal formalities must be performed when a company is set up. In particular two documents must be sent to the Registrar of Companies where they can be made available to the public. The Memorandum of Association must give the proposed company’s name and the address of its registered office a statement of the company’s aims, reference to the limited liability of its owners and the type and value of the shares to be issued. The Articles of Association give details of shareholders voting rights, share transfer procedure, arrangements for annual general meetings, and powers and duties of directors.

 

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