11. Private company: the structure of the authorised capital, Risk of a takeover. (Harper&Grant ltd. Overcomes the risk of a take-over and ensures the favourable redistribution of the share capital).

The death of Ambrose Harper, one of the two men who founded the company Harper & Grant ltd., causes a crisis in the firm. H&G is a private company. It was started originally by Hector Grant's father and the late Ambrose Harper together. A private company can be formed by two or more people. They sign Memorandum of Association, stating the number of shares they agree to take, and their signature is followed by the signatures of anyone else, often members of the family, who will also take shares in the company. In a private company there cannot be more than fifty members, or shareholders. The authorised capital of H&G Ltd was originally P5000, but the company has grown, and each 1 share is now worth about P100. Each share carries a vote at a shareholder's meeting. Hector Grant and Peter Wiles' mother has 20% of the capital each. Ambrose Harper-50 %, 10% in the hands of Wentworth. After his death his sister got this 50% of the capital/

Wenthworths, a large and succesful firm who manufacture mattresses for beds, own 10% of H&G shares. Mr. Wentworth senior was a personal friend of Ambrose Harper. His firm now has an opportunity of buying some of the shares formerly belonging to Harper. Hector Grant wants to stop Wentworth getting as many shares as he owns himself for fear of upsetting the voting power at shareholder's meetings. If Wentworth owned fifty-one per cent of the shares they would have a controlling interest, and would be in a very good position to take over H&G completely. This being done, it will become a fully owned subsidiary.

Hector Grant does not want Alfred Wentworth to own too many of the shares. Having raised a personal loan, he buys enough of the shares to outvote Wentworth. But a building society lent him money long ago to buy the property, and every year he repays a proportion of the loan to them, plus interest. By now, a lot of this loan has been paid back to the building society. Probably for this reason the bank agreed to a second mortgage. If Grant could not pay back the loan within the time limit his house would have to be sold and the first morgage paid up. Then the remainder would go to the holder of the second mortgage, in this case, the bank. It’s very ricky.

10. Types of businesses.

The basic economic institution in different economics systems is the business, Businesses determine much of how the economy operates. Businesses produce goods and services, and they come in every shape and size. Although the vast majority of the world’s companies are small, in many countries the economy is dominated by large firms. Large business differ from small ones in a wide variety of ways. In many countries there are nationalized companies belonging to the state, as well as private companies. A private company might be a small firm with just one owner or a very large firm with thousands of shareholders “owning” he firm.

Main types of business in nowadays economic world are sole proprietorships, partnerships, public and private limited companies (corporations in the USA), and cooperatives.

Starting a business requires more than natural resources, labour, and capital. An entrepreneur must organize these resources. Many entrepreneurs start their own business as sole proprietorships. A sole proprietorship is a one –owner business. They are easy to organize, decisions can be made quickly, owners receive all profits, etc. The advantages of sole proprietorships explain why so many people start business and try to run them alone. However, a sole proprietor sometimes encounters difficult problems in starting a business. One person has limited resources to start and operate a business. The owner has only personal savings and funds that can be borrowed. Because capital is lacking, most sole proprietors begin small and fail. Even those that succeed often stay small. A sole proprietorship also must deal with the problem of unlimited liability.

To increase their chances of successs entrepreneurs often choose partnership is an association of two or more people in order to run a business. Partners generally contribute equal capital, have equal authority in management, and share profits or losses. A partnership has many of the characteristics of the sole proprietorship. Partnerships are easy to organize, decisions can be made quickly, profits are shared with only a few people, and the owners are responsible for success or failure of the business.

Like proprietorships, partnerships are not free of problems. Liability is still unlimited. Like sole proprietors, partners are responsible for the debts of the business, Liability then can actually be greater in a partnership than in a sole proprietorship, since each partner is responsible for all the business debts. Partnerships also have limits life. If one partner dies, the business must be dissolved.

Consequently, the majority of businesses are limited companies (US - corporations), in which investors are only liable for the amount of capital they have invested. Often one person does not have enough money to start a business. Combining the resources of a number of people and forming a corporation is a way to raise the large amount of money needed. A corporation is a business, that although owned by one or more investors, legally has the rights and duties of an individual. Corporations have the right to buy, sell, and own property. Corporations may make legal contracts, hire and fire workers, set prices, and be sued, fined and taxed. A business must obtain a charter of incorporation from the state legilature to be lagally recognized as a corporation.