The main forms of business in Ukraine

2. Advantages / disadvantages of sole trader / partnership forms of business in Ukraine.

3. The main steps of private company’s registration in Ukraine.

The procedure of giving the company the legal name.

5. The comparative analyses of business’ forms in the UK and Ukraine.

 

SUPPLEMENTARY READING AND WRITING

 

 

TASK 1

Read the text “What is a Corporation?”, give your appreciation of the material. Discuss it with your classmates.

Put 10 questions in the form of a plan to the given text. Retell the text according to your plan.

What is a Corporation?

A corporation is a legal entity that is created by government grant. Courts speak of the corporation as an artificial person with an existence separate from the persons who organize, own, and run it. However, a corporation is created by people and can do nothing without the aid of people who act for it.

Although corporations are far outnumbered by sole proprietorships and partnerships, corporations do most of the business in this country. This is because the corporation has the following attributes, which are essential for large-scale enterprises:

Perpetual Life

Unlike the sole proprietorship and the partnership, a corporation is a legal entity separate and distinct from its owners and managers. Therefore it may continue indefinitely if granted a perpetual charter. Many American corporations are more than 100years old.

Limited Liability

Creditors normally cannot collect claims against the corporation from persons who own shares in the corporation. Of course, the corporation itself is liable without limit for its debts; all of its assets may be seized under court order to pay delinquent claims. But the individual stockholders have limited liability and can lose only the amount they have invested.

Transferability of Ownership Interests

Amajor advantage of the corporate form over the partnership form is the ease of transferring ownership interests. Normally, individual owners can sell their interests in the corporation without disturbing the company's operations or getting the consent of other owners. The stock of most large corporations is traded (bought and sold) on the New York Stock Exchange or the American Stock Exchange. By contacting a stockbroker, any person may buy or sell a reasonable number of shares of any listed stock within minutes when the exchanges are open.

Ability to Attract Large Sums of Capital

Because liability is limited to investment, and because owners buy and sell their interests with comparative ease, many persons invest in corporations. Thus, great sums of money are raised. Small and large investments by thousands of persons and institutions are combined to fund the giant corporations.

Professional Management

With substantial capital, efficient corporations generally have greater financial strength than do other forms of business organization. This enables corporations to attract superior workers by offering big salaries and fringe benefits. Moreover, because the corporation is not automatically dissolved by the death of any owner, it usually provides better assurance of continued employment.

 

Types of Corporations

In terms of purpose, a corporation is either public or private. A public corporation is established for a governmental purpose. State hospitals, and state universities are public corporations. A private corporation isestablished by private citizens for a business or charitable purpose. Sometimes a private corporation is called public because its stock is broadly owned by the general public. This differentiates it from a private corporation where the stock is owned by only one or a small number of shareholders. The latter type is also known as a close or closely-held corporation.

Private corporations are further classified as profit-making, nonprofit, and public service corporations. A profit-making corporation is a private corporation organized to produce a financial profit for its owners. Examples abound: banks, manufacturing and merchandising companies, and airlines. A nonprofit corporation is organized for a social, charitable, or educational purpose. It may have revenues, which exceed expenses, but it does not distribute any earnings to members as profits. If a nonprofit corporation engages in business for profit, it must — like any other business — pay income taxes. Churches, colleges, fraternal societies are typically organized as nonprofit corporations. Finally, a public servicecorporation (also called a public utility) is generally a private company that furnishes an essential public service. Electric, gas, and water companies are examples. These companies are closely regulated as to prices they can charge. However, they are often given monopolistic franchises and special powers such as eminent domain

 

How is a Corporation Formed?

Typically, a corporation is formed as a result of the efforts of one or more persons called promoters.These individuals bring together interested persons and take the preliminary steps to form a corporation. Regardless of the promoters' efforts, however, the resulting corporation is not liable on any contract made on its behalf. The promoters cannot bind an organization that is still to be created. Usually, though, once it comes into being, the corporation adopts the contracts and is bound by them.

Articles of incorporationare drafted, and when submitted to the proper state official (usually the Secretary of State) they are a plan that serves as an application for incorporation. In most states, when the articles are properly filed, the corporate existence begins. The articles are signed and submitted by one or more persons called incorporators.At least one of the incorporators must have legal capacity to enter into a binding contract. Thus, the incorporators cannot all be minors.

The articles of incorporation are a plan filed by the incorporators and they generally contain:

1. The name of the corporation;

2. The period of duration, which may be indefinite and everlasting;

3. The purpose, or purposes, for which the corporation is organized. This may be stated broadly, for example: «any purposes legal for a corporation in this state»;

4. The number and kinds of shares of capital stock to be authorized for issuance;

5. The location of the proposed corporation's principal office and the name of its agent to whom legal notices may be given;

6. The number of directors or the names and addresses of the persons who are to serve as directors until the first annual meeting of shareholders or until their successors are elected (in some states, the incorporators serve as directors until the shareholders elect their replacements);

7. The name and address of each incorporator;

8. Any other provision consistent with the law.

In some states, the incorporators file a certificate of incorporation instead of articles of incorporation, but with the same result. Many years ago, when a corporation was created by a special act of the legislature, a charter was issued. Today the word charter refers broadly to the articles (or certificate) of incorporation taken in connection with the governing statutory law. It also may refer to the contract that exists between the state and the corporation.


What are Shares of Stock?

Corporations issue small units of ownership known as shares of stock. A person who owns one or more shares of stock is a shareholder (also called a stockholder).

The corporation uses the money received from the initial sale of stock to buy equipment, supplies, and inventory; to hire labor; and to pay other expenses. As goods and services are produced and sold, more income flows into the business. Often earnings are reinvested. Money is borrowed to provide for further expansion, and sometimes more shares of stock are sold.

A shareholder is issued a stock certificate, which is written evidence of ownership and rights in the business. Stock ownership does not transfer title to specific corporate property to the holder. The corporation, as a legal person, remains the owner of all corporate property.

Stock may have a par value,which is the face value printed on the certificate. If it does not have a par value, it is no-parstock and is originally sold at a price set by the board of directors of the corporation. When either par or no-par stock changes hands in later transfers, the price may be much higher or lower. This market price will be determined by many factors, including economic conditions of the country, the industry, and the company — especially its past profits and future prospects.

Corporations may have one or more types of stock. Those found most frequently are common stock and preferred stock. Common stock is the basic type and generally the only kind that allows its owners voting rights in corporate elections. One vote per share may be cast. Common shareholders receive all dividends (distributions of corporate profits) unless preferred stock has been issued.

Preferred stock usually lacks voting power but does have priority claim on corporate dividends. For example, by contract with the corporation, the preferred shareholder may be entitled to receive $7 per share each year before any distribution of profits is made to the common shareholders. If profits are high, the common shareholders may get more money than the preferred shareholders. Preferred stock may also have a priority claim on funds generated by a corporate liquidation (sale of all assets) if and when the business is terminated.

Preferred stock may be cumulative. This means that if the dividend is not paid in a given year, it remains due and payable in the future. Each year the unpaid dividends cumulate (add up) and must be paid in full before the common shareholders receive any dividends. In some cases, the preferred stock is also participating. For example, in a given year, the fully participating preferred shareholder will receive the contracted amount of dividend per share, and the common shareholder will receive an amount per share equal to that received by a preferred shareholder. Beyond that, any balance of profits distributed is divided equally or in some other specified ratio between the preferred and common shareholders. Most corporations issue little or no preferred stock.

 

Who Actually Conducts the Business of the Corporation?

Although a corporation is a person by the language of the law, it must act through human agents elected by the shareholders, appointed by the directors, or hired by the officers. No shareholder, not even one who owns most or all the stock, can act for the corporation or bind it by contract merely because of such ownership. Shareholders indirectly control the affairs of a corporation by electing the directors. They also have the power to vote on major issues such as changing the corporate articles, merging with another company, or selling out in a firm take over. Antitrust laws do not forbid acquisitions or mergers of dissimilar companies. Large size in itself is not illegal.

The directors, elected by the shareholders, form a corporation's board of directors.The directors oversee the corporation and formulate general policies. They must not act fraudulently or illegally.

The board of directors may enter into any contract to promote the business for which the corporation was formed. While the board's powers are very broad, they may be limited by statute, by the articles of incorporation, or by its own corporate rules.

The number of directors varies among corporations. Most states allow the shareholders to determine the number. Some states require at least three. Other states require only one director, who can also be the sole officer and sole shareholder. This gives the corporation the attributes of a sole proprietorship plus the advantage of limited liability for its owner. Statutes sometimes require that directors be shareholders. A few states require that directors be adults. Some states require that the president of the company serve as a director, while in many corporations all the directors are officers. This is called an inside board,and is not considered ideal because the directors naturally tend to approve their conduct as officers. Better results are sometimes obtained from an outside boardwhich has no officers in its membership, and which scrutinizes corporate performance more objectively and critically. Probably the best form is a mixed board,with some officers to provide information and detailed understanding, and some outsiders “to ask the embarrassing questions”.

TASK 2

Read the text “ What is a Business Company? ”, give your appreciation of the material.

Describe in 150 words what kind of a business company you’d like to organize. Argue your choice. Discuss your point of view with your classmates.

What is a Business Company?

The company is a body corporate, which regulation is governed by one of the various Companies Acts, reduced effectively to the Companies Acts I948 and 1967. In popular usage it is a company with a share capital. Companies may be created by royal charter, by a specific act of Parliament, or may be registered with the Registrar of Companies Acts, particularly the Act of 1948.

In the case of companies dealt with under the 1948 Act, the liability of members may be limited by shares, by guarantees, or may be unlimited. The most common type of existed company in the UK is a company limited by shares. The principle characteristics of a company limited by shares are that each is a separate 'legal persona' ( i.e. a separate person) and that the liability of the company is limited to the nominal value of the shares.

Companies may also be public or private.

About 97 per cent of the limited companies registered in Great Britain are private companies. A private company is one which restricts the right to transfer its shares, limits its members to fifty (but has a minimum of two), and cannot invite the public subscribe for shares. It has certain legal privileges, but these are not of great consequence and the tendency today is towards removing them.

All companies registered as companies under the Companies Act 1948 are public companies, unless they satisfy the conditions necessary to constitute them.

A company may have any name provided that the board of trade does not think it undesirable. The last word must be 'Limited' except in the case of certain non-profit-making companies formed to promote the arts, science, etc. The name must be fixed or painted outside every office or place of business and must be conspicuous and easily legible. It must also appear on all business letters, notices, cheques, advertisements, bills, etc. If the word 'Limited' is omitted the consequences could be serious. The Registration of Business Names Act 1916 applies to any company carrying on business under a name not its corporate name. Where the word 'Limited' does not appear, the organization is not a company in the legal sense. The names of directors must also appear on catalogues, circulars, etc.

Undesirable names are those too much like the names of other companies. At one time words like 'royal' and 'imperial' were prohibited. They may still be disallowed by the Board of Trade.

The objects of a company must be stated in its memorandum of association. Anything inconsistent with these objects would be ultra vires. For this reason the powers or objects of the company tend to be stated in very broad terms.

If the main object of the company disappears, the company may be wound up. Objects must not be illegal. Objects or powers may be changed by altering the memorandum by special resolution. This alteration must enable the company to achieve its objects more effectively, to carry on some other business that can be conveniently combined with its own, to restrict or abandon some of its objects, to sell the business, or to amalgamate with another company. Application to the court may be made by holders of at least 15 per cent of issued share capital, or debentures, or any class of these. The application must be made within twenty-one days of the resolution. The court may confirm or cancel the alteration or may order the interests of the objectors to be purchased. Whatever the alteration, the court can do nothing if application is not made within the specified time. No alteration can be made which increases the liability of any member

 

 

TASK 3

Read the text “How to Found a Business in Great Britain ”, give your appreciation of the material.