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If
your business is expanding, you may consider changing your company
formation to a joint stock privately owned company (Ltd). By doing
this you will raise extra capital through selling parts of your company
(shares) plus you will have the added advantage of limiting your companies
liabilities. To do this you would firstly need
to find the true value of our company in order for you to divide
it into a number of shares (nominal value), this would be
calculated by looking at how well your business has performed in
the passed and what how your business would be expected to perform
in the future, this is normally done by a merchant bank and so you
would need to appointed one.
Once this information has been obtained you then need to
decide the number of people and the percentage of shares that
should be divided up between the shareholders.
Ownership needs to be considered carefully, as the
shareholder with the largest share of the business has the
greatest control. The
remaining shares can be sold to other businesses or family members
or acquaintances, but not generally to members of the public.
Under the
Companies Act, not more than 50 members can hold shares within the
company and these must be "desirable individuals"
stipulated in the Memorandum of Association (see below).
You also need
to appoint a board of directors for your company.
The board would control the company, making decisions and
driving the business and would be elected by all the shareholders.
This would mean that we would have to set up an election
process similar to government election - ballet papers,
canvassing, nominations etc.
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Memorandum of Association - Name of company, address, what we
do, liability, amount and division of shares etc
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Articles of
Association - who the shares are issued to, qualification and duties
of directors, division of profit, method of audit etc
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Statement of
nominal capital
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List of directors
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Plus other
declarations to say we have put measure in place according to the
Companies Act
Once this has
been done you will then receive a "Certificate of
Incorporation" and are then able to operate as a limited company
with letter Ltd after your company name.
As a limited company
you need to publish your annual account to companies house annually; these
accounts will be open for inspection by anyone interested in your
financial standing.
The advantages is that
all shareholders, including yourself, will benefit from limited liability
for debts incurred. This
means that, should your business get into difficulties financially, the
shareholders would only stand to lose what they originally invested; this
is a major advantage for you as it would help to attract more investors.
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