CLASS-4-6 B WEEK OF OCTOBER 5TH, 2020

SESSION 7- CONTINUATION OF PRIVATE SECTOR BUSINESSES-PRIVATE LIMITED

COMPANY, PUBLIC LIMITED COMPANY, FRANCHISES & MULTINATIONALS

Objectives:
 Setting up a Limited Company
 Private Limited Company
 Public Limited Company
 Franchises
 Multinationals

VIDEO CLIP SHOWING THE SETTING UP OF A LIMITED LIABILITY COMPANY

Setting up a Limited company-when a limited company is formed, it is regulated by the Companies

Acts of the country to which it belongs and operate in, and the name of the business is registered with
the Registrar of Companies. This registration is carried out by the presentation of two completed
documents known as:
(1) Memorandum of Associates-This document states the external relationships of the business,
such as the relationship between the company and others. It includes: the name of the business,
the address of the business, the objective of the business eg. to provide food etc, the liability of
the owners, the amount of capital with which the company is registered.

(2) Articles of Association-this document outlines the internal relationship of the business, that is,
the broad way in which the internal organization will operate. It includes: the rights of the
shareholders, the method of electing the director, the manner in which meetings are to be
conducted, the division of profits, method of audits etc.

Prepared by Heidi Bidaisee

Private Limited Company-has a minimum of 2 shareholders and a maximum of 50 shareholders.
Shares in such a business cannot be sold publicly! That is, shares cannot be sold on the Stock
Exchange. Stock Exchange meaning a market where shares and securities are bought and sold by
members/brokers on behalf of their clients and also on their accounts. Usually the shares are sold to
existing members or family members so to keep control of the ownership of the business. This of
course is a Limited Liability Company. Their names have “Ltd.” at the end. Example of these include,
ADM Imports and Exports Distribution Ltd., Columbus Communication Ltd.

Advantages of the Private Limited Company:

 Each shareholder has limited liability
 Continuity of existence
 There is greater capital as there are many shareholders
 Maintains control of ownership by selling shares to family and friends only
 The company has a separate entity from that of the owners.
Disadvantages of the Private Limited Company:
 Raising of Capital may be hampered since shares cannot be traded publicly
 Profits have to be shared among a larger group of people.
 A copy of the audited financial statement must be submitted to the Companies Office
 Transfer of shares is limited by the approval of existing members
 Legal requirements might be time consuming and costly
Public Limited Company-This type of business has a minimum of 2 shareholders but there is no
maximum. The abbreviation “plc” is usually found at the end of its name. Public Companies can sell
shares on the Stock Exchange, where they can raise capital. The members elect a Board of Directors to
take decisions on their behalf. Examples of Public limited companies are First Citizens Bank, Grace
Kennedy, Cable and Wireless and Trinidad Cement Ltd.

Advantages of a Public Limited Company:

 Shares can be bought and sold on the Stock Exchange which raises high Capital
 There is prestige in a Public Limited Company as its known as a “large” company
 Shareholders have Limited Liability
 There is continuity of existence
 Easy to get loans from financial institutions as it’s seen as larger and more reliable.
Disadvantages of a Public Limited Company:
 Many legal requirements which may be costly and time consuming to implement
 There is a risk of takeover bids as shares can easily be purchased on the stock exchange
 Published accounts can be viewed by the public, even competitors!
 It can become too large and difficult to manage.
Prepared by Heidi Bidaisee
  Franchises-A franchise is a form of business in which a firm that has a successful service or
product, (franchisor) enters into a contractual relationship with another business (franchisee) to
operate under the franchisor’s name. The privilege usually cost a fee, sometimes referred to as
royalties. The franchisee uses the name, products, techniques and marketing strategies of the
existing firm. Examples of these include many fast-food restaurants that we know: KFC, TGI,
Burger King, Subway, Mc. Donald’s etc.

Advantages of a Franchise:
 The franchisee can benefit from the reputation of the existing business
 Advertisement by the franchisor will benefit the franchisee
 The quality of the products is maintained in order to protect the reputation
Disadvantages of the Franchise:
 The franchisee has to pay a fee to the franchisor
 There must be a strict adherence to the standards outlined by the franchisor
 The franchisee may not be able to change the product in the ways he/she may wish to.
Multinational-company is one that has its head office in one country and has production facilities set
up in other, (subsidiary) countries. It is a basically a business operating internationally, although its
ownership is usually based in another country. Multinationals have the ability to generate high profits
and are able to employ many workers. Egs. of multinationals are: British Petroleum, Nestle, Coca Cola

Advantages of Multinationals:
 Cheaper labour might be available in the host countries
 Many people gain employment-both locals and expatriates (workers from a foreign country)
 They bring new techniques, management styles and new technology
 They encourage competition which forces local producers to improve their quality
 A greater variety of goods and services are available
 They are able to utilize valuable natural resources that otherwise might not be used locally.
Disadvantages of Multinationals:
 Most of the profits made are repatriated (sent back to the host country) and is not re-circulated
back into the host country
 They sometimes cause destruction to the environment in which they operate, eg. the many oil
spills causing harm to the sea creatures.
 They sometimes cause too much competition to our local producers even resulting in some
closing down.
Prepared by Heidi Bidaisee
CLASS-4-6 B WEEK OF OCTOBER 5TH, 2020
SESSION 8-ECONOMIC SYSTEMS

Objectives:
 Traditional/Subsistence Economy
 Free Market Economy
 Command Economy
 Mixed Economy
Introduction: An economic system is a means by which societies or governments organize and
distribute available resources, services and goods across a geographic region or country. Economic
factors regulate the factors of production, land, labour and capital.
 Traditional/Subsistence-This is a type of economic system that occurs today in very rural
settings. People basically only provide the essentials that they need, like food, clothing and
shelter. There is no specialization of labour in this system and little or no trade. There is also low
living standards in terms of amenities and no technology in this type of economic system. This
system still exists in very rural parts of Asia, Africa and South America.

Prepared by Heidi Bidaisee

  Free Market Economy-In a Free market (or Capitalist) economy, there is little or no
governmental interference. The government mainly provide defense services while most other
products and services are provided by private companies. This type of economic system occurs
in developed nations and is based on the private ownership of the factors of production, (land,
labour, capital). Market forces are allowed to determine how resources are allocated. This type
of economic system is sometimes referred to as Market Enterprise. There is no pure example of
this economic system, but very close examples are The United States of America, Hong Kong
and Singapore.

 Command Economy-is also known as a controlled or communist/socialist economy. In this type

of economic system, all resources are owned and controlled by the State. All decisions are made
the Government. The state decides what will be produced, how it will be produced and how
much will be produced! In other words, it is the state that decides what the community needs,
therefore demand is not influenced by the consumers. Close examples of countries with this type
of economic systems are China and Cuba.

Prepared by Heidi Bidaisee

  Mixed Economic System-A mixed Economic System is a combination of elements from a free
economic system and a planned economic system. Meaning that, it is midway between the two
extremes. The means of production and supply are shared by the private and public sector.
Therefore, meaning that there are goods and services supplied by both the private and public
sector. Caribbean countries exhibit the Mixed Economic System.

Prepared by Heidi Bidaisee