Role of Shareholders

In this assignment we are going to explain the role of shareholders, directors and partners in the different types of business; and then we will see the importance of legal constraints on decision making within business organisations.

1- THE ROLE OF THE SHAREHOLDERS:

There are no shares in the sole trader and partnership ownership; that is why shareholders do not apply in these two types of businesses.

In Private Limited Companies, there must be at least two shareholders but no maximum number. The principal duty of a member who is a shareholder in a limited liability company with share capital is to pay the company any outstanding amount of the purchase price agreed for the shares allotted to him/her. This sum becomes payable either where the company makes a call for funds or, in circumstances where the terms of issue of the shares provide for the payment of instalments, on the payment date. In the Private and Public Limited Companies, the shareholders choose the board of directors. In Public Limited Companies, the shareholders own the company as the share can be traded on Stock Exchange.

2- THE ROLE OF THE DIRECTORS:

The shareholders choose the board of directors, and then those directors choose the managing director. That is why you can have a director only in a company and not in the other types of business such as sole trader and partnership. The directors are responsible for the management of the company. As the head of the company, the directors are also responsible for ensuring that the company does everything that it is obliged to do by law. Every company director has a personal responsibility to ensure that statutory documents are delivered to the Registrar when required. The director of a limited company has ten months to get their accounts in. The director of a PLC has seven months. If the company accounts are received late a fine will be issued (this will vary depending on the length of delay and whether it is a PLC/LTD company).

3- THE ROLE OF THE PARTNERS:

We find partners in one type of business, which is partnership. From two to twenty, they manage the business and are equally liable for its debts. Partners can specialise into different fields, so that one partner's strengths can complement another's. For example, if a hairdresser were in partnership with someone with a business background one could concentrate on providing the salon service, and the other on handling the finances. This can develop the running of the business, as partners can carry out the tasks they do best at. As they run the business together, partners must be dedicated to their job by providing the best service to the customers.

THE IMPORTANCE OF LEGAL CONSTRAINTS ON DECISION:

When opening a business, especially a company, there are some legal aspects that have to be met in order to start your business. Sole traders and partnership just need to register to Inland Revenue and start trading. The Partnership Act 1890, section 1, defines a partnership as “the relation which subsists between persons carrying on a business in common with a view to profit”. When a partnership is created, the parties often draw up a deed of partnership which includes the provision of capital, management, and the sharing of profits. By the Companies Act 1985, section 716, an unlimited partnership must not normally have more than 20 members. A private company cannot trade until the Registrar of Companies gives the certificate of incorporation. A public company is required by the Companies Act 1985 to have an authorised and issued share capital of at least Ј50,000 in nominal value, of which at least one-quarter has been paid plus the whole of any premium. The business name is controlled by the Business Names Act 1985 and the Companies Act 1985. On registration, a private company must end its name with the word “Ltd” while a public company must end its name with “Plc”. Also the company must not discriminate against individuals because of gender, race or disability, nor can they choose someone else on the basis of the individual being