Transcript of Business English: Company Structures
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Business English: Company Structures Darren Ingram January 2015
This is a slightly modified version of a given lecture with
learning exercises removed.
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Introduction
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Ongoing Questions? Shout them out! Source: Wikipedia
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Is A Company?
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Company Probably of partly Anglo-Norman, Old French and Middle
French origin, from as a fact or state of being with another or
others (c. 1050), group of people or animals. Later expanded to
include body of soldiers (military unit), group or collection of
objects, friendship, sexual intercourse, social gathering of people
and an organisational body for various trades, professions or
guilds (c. 1370). Source: Oxford English Dictionary (retrieved
January 2015)
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organisational, regulatory, or representative body for any of
various trades, professions, or institutions; spec. a medieval
trade guild, or (in later use) a corporation which originated as
one, such as one of the City Companies of London. Also with capital
initial, esp. in the names of particular bodies. An association or
corporate body formed to engage in trade or industry, typically
having a legal identity distinct from that of its members; a
commercial business, a firm. Also with capital initial in the names
of particular companies. Abbrev.: Co. Source: Oxford English
Dictionary (retrieved January 2015)
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After one or more personal names in the title of a firm, usu. (now
always) in and Company: the partner or partners whose names are not
included in the main part of the name or title. (within a company
name) chiefly with capital initial, e.g. The East India Company or
John Company (hist). Many other definitions and euphemisms for
company in a non-corporate context. Source: Oxford English
Dictionary (retrieved January 2015)
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Alternatives? Just a few (dependent on context): body corporate,
guild, organisation, firm, business, corporation, concern. Many
variations on the theme: joint-stock company, share company,
limited company, etc. Sometimes, the reason for the type of company
structure used is responsible for its naming. Source: Oxford
English Dictionary (retrieved January 2015)
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Official Language Local usage of terms can vary, both officially
and unofficially due to internationalisation English as a majority
language (dark blue) English as a minority language (light blue)
English possibly used/understood (the rest) Source: Wikipedia
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Differences Can Exist Unless stated examples shown are based on
British law and practice. Seek legal advice if you need it!
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Legal Structures Sole Trader Limited company Partnership
Unincorporated Association Slight differences can exist between
English/Welsh & Scottish/Northern Irish company
law/registration.
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Trader An individual who operates a business or trade No protection
or limitation of liability: Individual responsibility for the
company, its debts and its behaviour It is possible to employ staff
All profits go to the shareholder (owner) after tax Low startup
risk/barriers; privacy Low regulatory oversight (accounts) and
management costs Higher risk profile
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Possibly liable to Value Added Tax (VAT) Potentially less
favourable taxation system Succession planning problems
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Limited Companies Many differences between private limited company
and public limited company Regulatory overhead larger for public
limited companies Perception issues between the two types
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Limited Company Minimum: one shareholder, share capital 1 The
company is legally responsible for everything it does and not its
shareholders (conditions apply) Shareholders (members) own part of
the company Directors (who need not be members) are responsible for
the company to both members and according to law
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Directors Responsibilities: Try to make the company a success,
using their skills, experience and judgment Follow the companys
rules as detailed in its articles of association Make decisions for
the benefit of the company, not themselves Tell shareholders if
they benefit from a company transaction Keep company records and
report changes to the authorities Make sure the accounts are a true
and fair view of the business Ensure compliance with tax-reporting
and regulatory requirements
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Theres More! Even if other people or companies are hired to manage
some of these things day-to-day (e.g. an accountant) the directors
remain legally responsible for the companys records, accounts and
performance.
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Financials The company hopefully receives income through sales and
declares a profit after expenses, costs and legal adjustments (e.g.
depreciation) are accounted for The profit is taxable (corporation
tax): others may also pay additional taxes (e.g. oil and gas) or
windfall taxes Profit can then be distributed to shareholders as a
dividend that is normally taxable or the profit can be retained for
future use Shareholders can also be employed by the company and
receive a salary with different tax treatment (also benefit in
kind) Directors loans (capital inflow and outflow)
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Regulatory Compliance Registered Office provision Maintenance of
records such as shareholder register, results of shareholder votes
and resolutions, loan, debenture, indemnity and mortgage register
Submission of information/changes to Companies House/HMRC (formerly
Inland Revenue) Some changes require shareholder approval of a
resolution through an AGM/EGM and communicated
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Accounts need to be maintained and prepared according to approved
standards Returns made for VAT, excise duties, Eurostat, Companies
House, regulatory bodies (as relevant) Records must be retained for
at least six (non current) accounting years: often much longer Time
differences can exist between accounting year and (UK) tax
accounting year
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auditor (audited accounts) no longer needed: unless required by
shareholders or articles of association Turnover is less than 6.5m
Assets held are less than 3.26m 50 or fewer employees on
average
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Daily Compliance A sign stating the official company name must be
clearly visible at all locations including the registered office.
All correspondence (including electronic) must show the registered
company name, company number, registered office address and nature
of the companys status, i.e. limited, public limited, etc.
Image:CompanyWizardUK
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Daily Compliance Director names are optional but it is list all or
none Share capital can be optionally displayed but the amount of
paid up (owned by shareholders) must then be shown
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Private or Public? A public limited company (PLC) is a company
whose shares can be freely sold and traded to the public (although
a plc may also be privately held, often by another plc) The company
does not have to be listed on a stock exchange Minimum share
capital of 50,000 (12,500 paid up); two shareholders; two
directors; one secretary (eligibility requirements exist)
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Essentially, Ltd and Plc structures operate in similar practical
regulatory environments Additional requirements do exist for Plc
structures, primarily concerning how shareholders are treated
Higher operational costs although these can be negligible (in the
grand scheme of things)
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Independent audit of accounts is mandatory Quarterly supervisory
board meetings required Greater public profile Easier to sell
shares / take inward investment
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Privatisation Public limited companies became common knowledge to
the average Briton during a long privatisation programme in the
1980s and 1990s, where state-owned assets were sold to regular
citizens (and institutions) It introduced many changes to society -
some good and some debatably less-so
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Privatisation
PrivatisationinBritainduring1980'sunderMrsThatcher,(C)BBC2007.
https://www.youtube.com/watch?v=Z7Qq01tC0lU
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Share Classes
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Ordinary Shares Include a right to participate in a company through
voting and an entitlement to receive dividends. Ordinary shares can
carry different rights. Often these are differentiated by name,
i.e. A shares, B shares, etc. Shares can have voting and non-voting
rights. Common values/rights per share class. If a company is wound
up the shareholders will be last to have the par value (shares face
value) returned.
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Bearer Shares An equity security that is wholly owned by whoever
holds the physical share certificate. The issuing firm neither
registers the owner of the stock, nor does it track transfer of
ownership. The company pays dividends to bearer shares when a
physical coupon is presented to the firm. Might be ruled out in
some jurisdictions, i.e. UK (ongoing consultation as of January
2015).
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Cumulative Preference Shares that allow the holder to be paid a
dividend in a later year if there are insufficient funds to meet
the dividend in an earlier year. This means the holder can probably
ensure that dividends for all years are paid regardless of the ups
and downs of the business.
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Preference Shares Preference shares are not included in equity
share capital as their rights are different to ordinary
shareholders rights. Does not normally give the right to vote and
will not take the control of the company away from the ordinary
shareholders. They carry a right to a fixed dividend so the
preference shareholder does not benefit if the companys profits
increase. Entitled to their dividend before the ordinary share
holders get theirs (more likely to be paid if the company is not
doing well.) In addition, if the company is wound up, holders to
get repaid the par value before the ordinary shareholders get their
money back.
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Redeemable Shares The terms of issue of redeemable preference
shares give the issuer the right to redeem them. This type of share
is near to having the qualities of a debt. Redeemable shares have
the advantage that they can be bought back after a certain time (by
the company). A form of debt financing.
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Non-Voting Share Non-voting shares carry no rights to vote and
usually no right to attend general meetings. Other classes of
shares can be non-voting but convey other rights. Widely used to
issue to employees or members of the main shareholders' families,
so that some of their remuneration can be paid as dividends.
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Share Classes The type and nature of share class issue, especially
for the larger PLC can be quite complex. Many complex hybrid
solutions can be made by canny legal advisers. With benefits and
flexibility come increased marginal costs for maintenance and
compliance.
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Partnerships Historically a partnership was used for certain types
of trade, e.g. solicitors, acting as a limited company without the
protection of limited liability. Each partner was equal in the
firm; each entitled to a share of the profit but jointly and
severally liable for the firms debts. Commonly called ordinary
business partnership.
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Partnerships Limited companies are capable of being a partner.
Recent legislative changes introduced limited partnerships and
limited liability partnerships. Some controversy about perceived
lack of scrutiny and potential for abuse by overseas
investors.
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Limited Partnerships A general partner can be personally liable for
all the partnerships debts A limited partner is liable up to the
value of their original investment A Limited Partnership must have
at least one general and one limited partner Standard compliance
(accounts, VAT, etc.)
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Limited Liability Partnerships The partners in an LLP arent
personally liable for debts the business cant pay - their liability
is limited to the amount of money they invest in the business.
Partners responsibilities and share of the profits are set out in
an LLP agreement. Designated members have extra responsibilities.
Minimum of two designated members. Companies can be ordinary
members.
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Limited Liability Partnerships Designated members must take
responsibility for various accounting/regulatory compliance issues.
Prosecution is the ultimate sanction for designated members who
fail in their duty.
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Unincorporated Association An unincorporated association is an
organisation set up through an agreement between a group of people
who come together for a reason other than to make a profit, e.g. a
sports club. Registration is not necessary and there are no
establishment costs nor routine reporting obligations generally.
Individual members are personally responsible for any debts and
contractual obligations. Basic financial records should be kept. If
the association starts trading and makes a profit, it is tax-liable
and must file a tax return in the same way as a limited
company.
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Company Types A company can also: a dormant company a trading
company (in operation) a company in receivership or
liquidation
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Job Titles
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Titles Most titles are flexibly-named and not defined or regulated
by law (e.g. solicitor, doctor, architect). Historically there
would have been a much tighter hierarchy and defined roles.
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C-Suite Highest-level operational management Can control thousands
of staff (or just one) Not all titles may be present in a
company/division Strange titles can sometimes replace more
traditional titles, i.e. Director of Fun
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C-Suite Chief Executive Officer (CEO) Chief Operations Officer
(COO) Chief Financial Officer (CFO) Chief Risk Officer (CRO) Chief
Technology Officer (CTO) Chief Information Officer (CIO)
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C-Suite Chief Marketing Officer (CMO) Chief Creative Officer (CCO)
Chief Administrative Officer (CAO) Chief Diversity Officer (CDO)
CxO as a collective term Others: President, Executive Vice
President, Senior Vice President, Vice President, General Manager,
x-Director
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Greasy Pole CEO/Chairman/Managing Director President/COO/Deputy or
Vice MD CxO/EVP/x-Director VP/Senior Managers Managers Executives
Board of Directors sits to the side; may include also operational
management. ar weighting and vary between organisations and
countries. Even in the U.S. state legislation can
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Linguistic Differences
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British English versus.. Some business terms or definitions vary
between English-speaking nations due to usage, custom and practice
or legislative definition. Growing internationalisation often blurs
the lines so many American English terms creep into British English
usage.
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Examples British American Annual General Meeting Annual
Stockholders Meeting Articles of Association Bylaws Authorised
Share Capital Authorized Capital Stock Company Corporation Into
Administration Goes Bankrupt or Chap. 7 (liq)/Chap. 11 (reorg)
Memorandum of Association Certificate of Incorporation Ordinary
Share Common Stock Quoted Company Listed Company Shareholder
Stockholder Turnover Revenue or Sales
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Examples British American Sole Trader Sole Proprietor Partnership
General Partnership/Limited Partnership/ (various per earlier
slides) Partnership With Limited Liability/Joint Ventures Limited
Company & Corporation Public Limited Company - Limited
Liability Corporation (hybrid corp/part) - S Corporation (taxed on
personal level) - Cooperative Unincorporated Association - Charity
Not-for-profit organisation (wider definition, can include
religious orders, libraries, etc). U.S. corporate structures and
rules/treatment can vary between states. Gateway to information
sba.gov - Legal advice may be necessary to determine needs.
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Listening Test How many business-related terms can you pick up?
ExtractfromMaryPoppins(C)1964WaltDisneyProductions
https://www.youtube.com/watch?v=XxyB29bDbBA
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Quite A Few Words Including: invest/invested, bank, compound,
affluence, directors, safe, proprietary, prudently, thriftily,
frugally, fidelity, fiduciary, account, credit, semiannually,
financial, established credit, trust deeds, foreclosure, bonds,
dividends, shares, bankruptcies, debit sales, private enterprise,
mercantile, corporations, amalgamations
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Business Jargon: taking a helicopter view
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All Is Bad Some business jargon is just descriptive with a specific
meaning to those inside the bubble. However a lot of it is of
debatable value and use; with it being used to make something sound
better than it is, often in the hands of people who dont really
understand its true meaning.
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a rapid 360-degree overview of contemporary business jargon
MissionStatement/"WeirdAl"Yankovic,(C)2014
https://www.youtube.com/watch?v=GyV_UG60dD4
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Another business shorthand term: Any Other Business
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Questions? Disagreements? Darren Ingram darren@ingram.fi
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