Pakistan study notes for Matric, Intermediate, B.A, B.COM BSC, M.A, BCS. Free Pakistani Urdu educational school, colleges and University notes.

SPECIAL FEATURES / CHARACTERISTICS OF A COMPANY

SPECIAL FEATURES / CHARACTERISTICS OF A COMPANY

 

The corporate form of business has the following chief characteristics which the other forms do not enjoy.

 

Separate Management

In the corporation, ownership is separated from the management. Shareholders do not take part in the affairs of the business. They elect a board of directors from among themselves who runs the corporation with the help of hired specialized and skilled personnel.

 

Name Of The Company

The name of the company is followed by the word ‘limited’ which becomes its part. The word limited denotes that the liability of the shareholder of the company is limited to their individual investments.

 

Board Of Directors

Every company must have a board of directors. These directors are the representatives of and elected by the shareholders of the company. This board runs the whole affairs of the company on behalf of the shareholders who have no direct participation in the conduct of the business of the company

 

Charter Restrictions

The company can not change its name, head office, objectives, authorized capital, and liability which have already been registered with the registrar of the companies:, Before the company wants any change in any of them. It must get a prior permission from its shareholders, civil court, and the government.

 

Annual Financial Statement

Every public company must submit its annual financial statements to the government i.e. the registrar of the companies. Financial statements include income statement and balance sheet. These accounting documents must be audited.

 

Compulsory Registration

‘The corporation cannot come into existence unless it is registered under the Companies Ordinance 1984 inPakistan. After it is so registered, it is issued a certificate known as a registration certificate’. Another certificate is required known as a commencement certificate necessary to start actual operation of the company. This certificate is not required by the private company.

 

Compulsory registration is not required of a sole proprietorship or partnership form of businesses.

 

Limited Liability

Another important characteristic of the company which makes it quite different from other forms is its limited liability. The liability of shareholders is limited to the amount of their investment in the company.

 

Transferability Of Ownership

Shares of the company can be bought and sold on the open market. This act is referred to as transferability of ownership which does not affect the life of the company. On the contrary, ownership in sole proprietorship and partnership cannot be changed or transferred unless they are dissolved

 

Public Subscription

The company (public company only) should offer its shares to the general public for subscription to raise funds.

 

Preparation Of Necessary Document

The company must prepare a number of documents including memorandum of association, articles of association, prospectus or a statement in lieu of prospectus. All these document must be submitted to the registrar. In addition, the company must obtain registration and commencement certificates from the registrar (The last one is not required of the private company).

Large Size

The company is of large size in capital and in manpower. If needed, the capital can be enhanced by floating new stock on the stock exchange.

 

Membership Of Stock Exchange

Most public companies are listed on the stock exchange which facilitates them to let the investors to buy and sell their shares.

 

Numbers Of Shareholders

Another significant characteristic is that in the company the number of owners (Shareholders) is the greatest of all the other forms of ownerships. Especially, sole proprietorship, partnership, and private company. .

 

Employees Benefits

Employees of the company enjoy a lot of benefits as perks. Allowances, pension, gratuity, provident hind, vacation, medical, etc. which other forms of ownerships cannot afford to offer.

 

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