PRINCIPLES OF
BUSINESS
TH
4 OPTION
MARION DENNIS-WHYTE
The Companies Act contains the laws
relating to companies. To comply with
certain requirements which were laid down
by the Companies Act, the promoters of
the company must present the following
documents:
The Memorandum of Association
Company name ,
which must
contain the word
limited
Address of the
company’s
registered office
Statement that the
liability of the
shareholders is
limited
Objectives of the
company
Authorized share
capital and the
types of shares to
be issued
The Articles of Association
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Procedures for calling an Annual General meeting.
Rights and obligations of the directors
Procedures governing the election of Directors
Statement concerning the borrowing power of the company
Procedures dealing with the payment of dividends
Statements
of
authorised,
Registered
or
Nominal
Capital
• This is the amount stated in the MOA, which
is the maximum amount which the company
is authorized to raise.
• This is an invitation to the public to buy
Prospectus
shares in a public company. It contains
detailed information to enable investors to
estimate its prospects. It is important that the
public should not be misled.
• Statutory declarations are commonly used to
Statutory
Declaration
allow a person to declare something to be true
for the purposes of satisfying some legal
requirement or regulation.
• This is a legal document relating to
Certificate of
Incorporation
the formation of a company or
corporation. It is a license to form a
corporation issued by state
government. Its precise meaning
depends upon the legal system in
which it is used.
Certificate
of
Trading
It is the certificate issued by the
registrar of companies to the public
limited company to grant permission
to commence its business.
The private limited company may begin trading
after receiving the certificate of incorporation, but
the public limited company must issue a prospectus
inviting the public to subscribe for shares before a
certificate of trading is issued.
• A multinational company is a company that has
Multinationals
headquarters in a home country and operates
businesses in various host countries. Examples of
Multinational companies in the Caribbean are
Shell, Kentucky Fried chicken and Digicel.
They provide employment.
Advantages
They introduce advanced
technology.
Provide well needed goods and
services.
• Profits earned are repatriated to the main
centre in their home country.
• They may exploit the workers by paying low
Disadvantages
wages and having them work long hours.
• They cause unemployment when they close
down to take advantage of cheaper labour
and lower operational cost in another country.
Franchise
A franchise is an agreement between a franchisee
(the person requesting permission to set up
business) and the parent company to allow the
franchisee to sell its products or services. Some
businesses begin by the owner acquiring a
franchise to operate under an already existing
business name. Many multinational companies
expand into new regions through franchises.
The franchisee bears the name of the parent
company. They must abide by all the rules and
guidelines outlined by the parent company to sell
its products. It pays royalties (a fee) to the parent
company to operate under its business name.
Advantages
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Access to new markets for the franchisor
Source of revenue for the franchisor
The franchisee bears some of the risks
Franchisee benefits form the support provided by the franchisor eg. Training
The franchisee’s risk is reduced because it is selling a recognised brand.
The Franchisee must
pay the royalties
regardless of business
size
Disadvantages
The franchisee has to
operate under
supervision of the
franchisor
The franchisee is legally
bound to sell only the
products of the
franchisor