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38 Cards in this Set
- Front
- Back
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Sole prorietorship |
Profits taxed as personal income unlimited liability life of company linked to owner |
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Partnership |
Requires agreement limited or unlimited partners (must have unlimited) partnership terminated if one dies or leaves. difficult to raise cash profits taxed as personal. |
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Limited corporation |
Articles and memorandum required limited liability board of directors life of company unlimited (hypothetically) |
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memorandum of association |
rules by which corporation is governed |
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articles of incorporation |
1.Name 2.Intended life of company. 3. Business purpose 4. Number of members of initial board. 5. Nature of rights granted to shareholders. 6. Number of shares authorized to issue. 7. Statement of limitations and rights of each class of shares. |
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Examples of single tier countries |
Ireland, UK, US , Sweden
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Board of directors in single tier |
Chair/CEO at top. Directors and non-executive directors nxt lvl. |
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Two tier countries (ex. Germany, netherlands) |
Supervisory board at top then the same. |
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Practice in Unitary board |
Board reports to shareholders. Shareholders elect directors at AGM |
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In Dual Board |
Board reports to supervisory Supervisory elect directors supervisory = representatives from banks, gov't, trade unions etc |
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Partnerships v Corporations (Liquidity) |
Part: Restricted trading Corp: Trade easily |
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Voting rights |
Part: Partners have control Corp: Each share gives a vote |
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Taxation |
Personal v corporate rate |
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Reinvestment plus dividend |
Part: all profits allocated to them Corp: Total freedom in dividend decisions |
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Liability |
Part: General partners have unlimited Corp: Shareholders have limited |
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Continuity |
Limited v Unlimited |
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Ireland + UK . PLC |
Public Limited Company |
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Ltd |
Private limited company |
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Agency theory type 1 |
Relationship between managers(agents) and shareholders (principal) |
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Type 2 |
Relationship between majority shareholders and minority investors |
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Issue of Conflict between managers and Shareholders |
Managers self interests(wealth /power) v shareholders interest( company value maximization) |
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Agency costs (Direct) |
Corporate expenditure that benefits managers at expense of shareholders |
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Indirect |
Corporate expend to monitor and control manager activities(auditors,jets,large administrative tiers) |
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Shares classes |
Google Brin and page own 5.7% but have 57% voting power . |
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Pre-emptive rights |
Wish to sell equity. must offer to existing shareholders before general public. So they have chance to protect their proportionate ownership. |
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Dividends |
Not tax deductible, paid out of after tax profits |
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Cumulative board voting (allows minority participation) |
Shareholder may cast all votes for one person. All directors elected at once. N Director spots . 1/(N+1) % of the shares plus one share guarantees a seat. |
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Straight voting |
May cast votes for each member. Members elected one at a time Guarantee = own 50% plus 1 vote. |
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International corporate governance emphasis |
1. Investor protection 2. Financial system. 3. Control mechanism 4. Firm corporate governance systems. |
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Country leval legal rights of shareholders |
1. Proxy voting allowed. 2. Cumulative voting in place or P.R 3. Minimum percentage to call Extraordinary shareholders meeting. 4. Pre-emptive rights exist. 5. Oppressed minorities mechanisms exist. 6. Votes not blocked before AGM. |
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Financial system: Bank Based (Germany and Japan) |
Banks are central to moving funds between demanders and suppliers of capital. More monitoring |
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Market Based (US and UK) |
Securities markets are as / more important External market discipline |
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Banking development |
Concerns bank liquid liabilities, bank assets and domestic bank deposits |
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market development |
Concerns market capitalization and total trading volume / GDP |
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Domestic Bank Deposits /Stock Market Capitalization |
High ratio regards you as a bank based systems
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High ratios ( > 2.5 ish) |
Germany , Iceland , Portugal , Egypt |
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Widely Held Firms |
Seperation between ownership and contrl Agency issues are presence Exit investment strategies |
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Closely held firms (ex bank , state, family) |
Manager and shareholder incentives aligned agency issues between controlling and non controlling shareholders voice investment strategies |
