CURS ANUL II AP

TITLE Types of business organization

Contents 1. Types of business organization
2. Writing a report.

PRELIMINARY DISCUSSION

Answer the following questions:

1. What are the steps necessary for a company to be incorporated in
Romania? What papers have to be submitted in order to have the
Certificate of incorporation issued?
2. What types of companies are the following:
- Mc Donalds Fast Food Chain Shop
- East seventeen Fast food
- Ion Tiriac Abnk
- Faur S.A.
-
3. Under what circumstances will a company be wound up in Romania?
What are the formalities required?
4. What type of business organization will be the most suitable if :
- you intend to open an internet café in your neighbourhood;
- you intend to set up a newsletter/newspaper specialised in
information on businesses and economic activity in Iasi
- you and some friends decide to start a self serviced laundry
shop in Tudor;
- other ideas of your own.

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VOCABULARY

KEY TERMS
legal personality corporation incorporation public companies
private companies Registrar of Companies shared capital
memorandum of association articles of association liability
objects of the company shares ordinary shares
preference shares dividend shareholder debentures
insolvent dissolve winding up partnership

Read the following text:

The Law, which gives every human being " legal personality" implying the
whole of its rights and duties, also gives legal personality to certain entities that are
not human; these entities are known as "corporations" and they are said to have
"corporate personality". Once it comes into existence, a corporation is distinct from
any of its members and it acquires, in the eyes of the law, a separate existence, having
its own rights and duties.
In Britain, a corporation can come into existence only in the manner
prescribed by the law in three different ways:
a. By the Crown by royal charter -nowadays, universities are created in this
way, also the Bank of England;
b. By a particular statute - modern public corporations are created in this
way;
c. By compliance with statutory formalities - trading companies belong to
this category.
Statutory corporations (b. and c.) are created by the act of incorporation
which implies several things:
- a corporation can sue and be sued like any person;
- it can carry on various activities just like any person ;
- corporations may hold and dispose of land and other property like any
individual.

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Statutory corporations can be divided as: public companies and private
companies. They are also known as joint-stock companies In order to come
into existence, a company must meet a number of requirements:
- the number of its members, which must be at leas two;
- the nominal value of their shared capital must be no less than the
minimum authorized by the law ( £ 50,000 in Britain at present);
- following a number of papers submitted, to this instance, the Registrar of
Companies issues a certificate of incorporation.
A company is formed when its promoters subscribe their names to a
memorandum of association and, also, where this is required, to articles of
association. When these documents have been submitted to the Registrar, the
company is registered and a certificate is issued to prove that has become
incorporated. The memorandum of association:
- sets out the objects of the company and the sort of business which it is
empowered to carry on;
- states the corporate name, address (and part of the country )where its
registered office is to be situated; the name should include the words
"public limited company" or PLC, replacing the previously used Ltd.
(limited);
- states the amount of the company's capital;
- also states the nature of the liability of its members, that is the limits of its
powers. The liability of the investor is limited to the amount he has agreed
to contribute into the capital.
There are three classes of companies: limited by shares, limited by
guarantee and unlimited companies.
The most common class is that of companies limited by shares: their
capital may consist of different classes of shares, such as ordinary shares and
preference shares; the former type of shares are not fixed but depend for
dividend upon the part of the profit set aside by the directors for distribution
among the shareholders when the liabilities of the capital have been met; the
latter type carry fixed rights to dividend.
In a company limited by guarantee, the liability of the members is
limited to the amount of money which each of them undertake to pay if the
company is wound up.

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 An unlimited company is the company in which the liability of its
members is unlimited.
Private companies have to comply with less strict requirements in
relation to the contents of their accounts and their profits may be distributed as
dividends, but they are not permitted to offer their shares or debentures for
public sale; therefore they cannot be quoted on the Stock Exchange.
Debentures are different from shares; a debenture is a documents that certifies
a company's indebtedness to certain persons who have advanced loans in
return for the payment of interest; this indebtedness is generally secured by a
mortgage or a charge upon the company's property which entitles the
debenture holder to payment in priority to the other ordinary creditors if the
company becomes insolvent.
Companies are dissolved by a process called "winding up". This may
happen if the company becomes insolvent or when the members wish to end
the life of the company, but only if it is still solvent.
A different form of business organisation is the partnership. This is a
relationship between persons carrying on a business in common with a view to
profit. A partnership is constituted officially by the conclusion of articles of
partnership, which specify the number of partners, the amount of the capital
which they supply, the object of their activity. The most common partnerships
are those of solicitors, accountants and members of a recognised stock
exchange.
However, the oldest form of business is the so-called sole
proprietorship, which is a business owned and operated by a single person.
He has complete freedom on the way he decides to run his business, unlimited
liability and he is solely responsible for the enterprise.
Co-operatives are a different form of business which is owned and
managed by associations of persons who voluntarily aggregate with this
purpose. In such an organization the running of the business is controlled by
its work force.
A joint-venture is a business owned jointly by tow or more
independent companies who continue to function independently in all other
respects but pool their resources in a particular line of activity. Firms set up
joint ventures for a variety of reasons. The combining of the resources may

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 facilitate the establishment of larger scale operations, increasing its penetration
on the market. For example, one firm can contribute new technology and
products and the other providing market expertise and distribution channels.
While the advantages of joint ventures are obvious, one potential danger lies in
the relation between the partners and caution must be taken in establishing
how the business should be managed and developed.
(Adapted from Philip S. James - Introduction to English Law )

TASK 1
Arrange the steps involved in the process of forming a (joint stock) company in the
correct order:
a. issue share capital
b. the commencement of trading
c. the preparation of articles of association
d. application to the company registrar for a certificate of incorporation
e. the drawing up of the memorandum of association

TASK 2
Match the term with the correct definition:
1. issued capital
2. called-up capital
3. authorised capital
4. reserve capital
5. paid-up capital
6. share capital
7. working capital

a. the total of shares issued or authorized to be issued by the company; also

called nominal capital;
b. the capital stated in the memorandum of association;
c. the amount of capital actually issued by the company;
d. the amount called up and paid on shares issues;
e. the total amount for which a demand has been made on the shares issued
by a company

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 f. a portion of the company's capital not already called up that cannot be
called up except in the event of the company being wound up;
g. the difference between current assets and current liabilities;

TASK 3
Choose from among the given terms and fill in the gaps:

CAPITAL CERTIFICATE REGISTER

OWNERS PROFITS DIVIDENDS ORDINARY#2
PREFERENCE#2 FIXED CLAIM WOUND UP
VARY RESERVES LOAN CAPITAL INTEREST
DEBENTURES ANNUAL GENERAL MEETING
REPORT AND ACCOUNTS PROXY

Shares are a financial security issued by a joint stock company as a means of

raising long term 1………. Purchasers of shares pay money to the company and in
return receive a share 2…………. signifying their ownership of the shares and have
their ownership recorded in the company's share 3……….. The shareholders of a
company are its legal 4……….and are entitled to a share of its 5………….., receiving
some of these profits in the form of 6……….. There are two kinds of shares:
7……….. shares and 8………. shares. Holders of 9…………shares are entitled to a
10………….. dividend from the company's profit before the other shareholders
receive anything and they also have first 11…………. on any remaining assets of the
business after all debts have been discharged. Holders of 12……….. shares are
entitled to a dividend from a company's profits after all the other outlays have been
met, and are entitled to any remaining assets of the business in the event of the
company being 13………... The dividends paid tend to 14…………… form year to
year with profits earned, though some profits may be retained in the company and
added to 15………… to be used to finance the acquisition of further assets. In this
respect shareholders differ from the providers of 16……………. who are rewarded by
means of regular payments. The providers of loan capital secure their position by the
possession of 17……….; as lenders, they are offered security by means of a general
claim against al company assets, or a specific asset such as a particular machine.

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 Shareholders meet yearly in the 18………. (AGM ) in order to discuss the
company's annual 19………., elect the directors and agree the dividends suggested by
the directors. In practice, however, these meetings are poorly attended by shareholders
and directors rarely fail to be re-elected on the strength of 20……….. votes cast in
favour of the directors.

TASK 4
Insert the suitable prepositions in the following text representing a notice of an AGM:
Notice is hereby given ……the Board of Directors of the Company that the Annual
General Meeting of shareholders of Mega Inc. will be held … the Europe Hotel …
March 19th 2002 …. the purpose of considering and voting the following matters:
1. the Chairman's statement;
2. the Statutory Auditors' report;
3. discharge …. the Directors concerning their duties relative to the year
ended December 31st, 2001
4. Approval … the distribution of a dividend of $150 per common share and
the carrying further of the balance of the profit.
5. Election of the Board of Directors and the Statutory Auditors … the new
one year term.
6. Election of the Mr. S. Brown … a new member of the Board of Directors.
7. Approval of the 2001 Stock Award Plan covering a cumulative total of
110,000 bearer shares.
8. Approval of the consolidated financial statement of the Company … the
year ended December 31st, 2001.
9. Miscellaneous and individual proposals.
Note: Any member who is entitled to attend the meeting and will not be able to attend
….various reasons is entitled to appoint a proxy to attend and, …. a poll, to vote …
his behalf. A proxy need not be a member of the Company.

TASK 5
Translate into English:
TASK 6
Translate into Romanian:

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TASK 7
A business project
If you have decided to set up your own business, you should obviously start by
producing a business plan that could interest possible investors and help you in the
essential task of raising funds. However, even if you do not need outside finance, a
carefully devised business plan will be a helpful tool in managing and monitoring the
business.
The content of the plan should include:
 A short summary of the business, the way you see it managed, the
projected activities and the funds required;
 The company's objectives and related strategy;
 The principal activities, products and history;
 The markets, customers and competition, research and development;
 The management;
 The basis of operation including suppliers, manufacturing processes and
distribution system;
 Major resource requirements;
 Financial information including projected profit and loss accounts, balance
sheets and projected cash flow statement ;
 The principal risks to the business and their likely impact on the funding
requirements;
 The long term plans of the business.
Decide on a business in a field you are interested in and try to devise your own
business plan according to the one presented above. You may refer back to the
preliminary questions.

TASK 8
Summarize the following text in no more than 100 words:
An economist would define a monopoly as a situation where at least one
quarter of a reference good or service is supplied by one firm (dominant - firm
monopoly), or a number of suppliers who restrict competition among themselves
(complex monopoly). Mergers falling within the scope of legislation are those which
create or intensify a monopoly situation, defined by the one quarter market share rule,

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or where the value of assets taken over exceeds £70 m. Anticompetitive practices are
those which distort, restrict or eliminate competition in market.

TASK 9
Match the definition with the suitable term:
1. a cartel
2. a trust
3. a conglomerate
4. a holding
5. a merger

a. a combination of two or more companies by combining accounts or by

consolidation, as when a new company is formed and it acquires the assets of the
companies involved in the merger;

b. A combination of companies grouped according to their interests, usually

involving companies interested in the same industry; it controls the commercial
policy of a number of establishments, creating - when it is strong enough to
eliminate competition - a monopoly;

c. An association of business organisations which do not merge, but agree among

themselves to cooperate in regulating production and marketing of products in one
particular industry in order to avoid competition;

d. A company or a syndicate of shareholders mainly interested in owning the stock or

securities of other companies, also called subsidiaries (the holding company being
called the parent company) and control the composition of the board of directors.

e. A group of diverse establishments which are not involved in the same economic
domain, but who decide to apply the same policies and methods in order to
achieve power and to spread risks.
(Adapted from M. Marcheteau - Business & Economics )

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Section 2 WRITING A REPORT

TASK 10

Choose on of the following situations and write your own report:

a. Write a report on how the library you normally go to works and what
shortcomings there are in the service and what changes you would suggest in
order to improve it;
b. Consider coffee drinking (during breaks?) in FEAA, the position of coffee vendors
and how profits can be increased by making the necessary adjustments.

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