1. Tick the correct answer of the questions in the table.

		Corporation	Partnership	Sole proprietorship
1	Which entity best protects the property and assets of the shareholders?
2	Which entity no longer exists when its owner dies?
3	Which of the entities mentioned is the most expensive to form?
4	Which entity type(s) require relatively little paperwork?
5	Which entity requires shareholder-employees to pay unemployment tax?

2. Complete the table:

Advantages and disadvantages of corporations compared to sole proprietorships and partnerships:

Advantages: Stockholders are not liable to corporate …….. Self-employment tax …… Continuous ….. Easier to raise …… Easier to …….

Disadvantages: Higher ….. Formal organization and corporate …… Unemployment ……

Unit 3 company structure

ACTIVE VOCAVULARY

running business – управление компанией shareholders – акционеры employees – работники get shares in return – получить акции взамен goods or services – товары или услуги Board of Directors – совет директоров Chairman = President – глава компании Managing Director = Chief Executive Officer (CEO) – главный исполнительный директор hire – нанимать overall responsibility – полная ответственность day-to-day affairs – повседневные дела owe a duty to the company – нести ответственность перед компанией legal entity – юридическое лицо senior managers = company officers report to – отчитываться перед Personnel = Human Resources - отдел кадров Research and Development or R & D – отдел научных исследований и разработок regulations for incorporation – нормативные акты, регулирующие процесс создания компании trading name – фирменное название application for the registration – заявление о регистрации компании prior approval – предварительное одобрение certificate of incorporation – свидетельство о регистрации компании constitutional documents – учредительные документы компании statutory forms – официальные формы отчетности filing fee – регистрационная пошлина Memorandum of Association – учредительный договор компании Articles of Association – устав компании registered office – юридический адрес компании mortgage company property – закладывать имущество компании raising finance – привлечение финансовых средств authorized share capital = nominal capital – уставной капитал компании issue share capital - выпускать акционерный капитал liability limited by shares – ограниченная ответственность liability limited by guaranty – ответственность, ограниченная поручительством enter into contracts – заключать договоры nominal value of shares – номинальная стоимость акций sell assets – продавать активы provisions – положения документа alter – изменять prescribed procedures – установленный порядок lodge a document – представлять документ internal management – внутренне управление annual general meetings (AGMs) – ежегодное собрание акционеров extraordinary general meetings – внеочередное собрание акционеров loans – займы, кредиты share transfer – передача акций allotment of shares – распределение акций powers and duties – полномочия и обязанности company’s register – реестр компании

beneficial ownership – бенефициарное право собственности nominee – номинальный владелец unless otherwise stated – если не предусмотрено иное exercise the right attached – пользоваться предоставленным правом vote – голосовать receive dividends – получать дивиденды enforce rights against the company – осуществлять свои права в отношении компании appoint and remove the directors – назначать и снимать с должности директоров remain in position – оставаться в должности listed company – официально зарегистрированная компания stand for election annually – участвовать в выборах ежегодно on behalf of – от имени/от лица executive and non-executive directors – исполнительные директора и наблюдательные члены Совета директоров fee – вознаграждение за услуги salary – зарплата mandatory qualifications – обязательные требования к образованию undischarged bankrupt – не восстановленный в правах банкрот leave = permission company compliance – соблюдение компанией требований filing of documents – подача документов Company’s House – регистрационная палата criminal offence – уголовное преступление imposition of a fine – наложение штрафа criminal record – судимость accounts – бухгалтерские отчеты Registrar of Companies – бюро регистрации акционерных компаний defaulting company – неплатежеспособная компания charge a late filing penalty – взымать штраф за задержку в подаче submit annual returns – представлять отчетные данные за год strike off the register – исключить из реестра dissolve – распустить notice – уведомление statutory notices may be validly served – официальное извещение может быть вручено на законных основаниях chief administrative officer – главное должностное лицо experience and expertise – знания и опыт accounting and finance – бухгалтерия и финансы corporate governance – управление компанией employment legislation – трудовое законодательство security of documentation – надежная защита документов insurance – страхование default committed by the company - невыполнение обязательств компанией remit of their duties – круг обязанностей maintaining the statutory register – ведение официальной документации keeping minutes – ведение протокола собрания

READING

Read and translate the text using Active Vocabulary

According to the global internationalization many countries although having different cultural, social, economic and political customs have worked out similar principles of running business and making companies in different spheres of life.

Most companies are made up of three groups of people: shareholders, the management and the employees. Shareholders provide the capital; they invest money in the company and get shares in return. The management are people who manage the affairs of the company, run the process of producing some goods or services. The employees are those who practically produce these goods or services.

At the top of the company hierarchy is the Board of Directors, who are usually the main investors to the business and it is headed by the Chairman or President. Then comes a Managing Director (MD) or a Chief Executive Officer (CEO) who may be hired or chosen from the Board and has overall responsibility for running the business and controlling the day-to-day affairs of the company.

Every company must have a company secretary who cannot also be the sole director of a company. This requirement is not applicable if there is more than one director. A company’s auditors are appointed at the general meetings. The auditors do not owe a duty to the company as a legal entity, but rather to the shareholders to whom the auditors’ report is addressed.

There are senior managers or company officers who head the various departments within the company and report to the CEO about the production process, which is carried out by the employees.

Typical company may have the following departments within itself:

• Marketing

• Public Relations

• Information Technology or IT

• Personnel or Human Resources

• Finance

• Production

• Research and Development or R and D

Every department is engaged in its particular round of duties and responsible for the concrete function in the process of providing goods or services.

The regulations for incorporation, that is, forming a company, are set out in the Company Act 2006. There are a number of steps to be followed in this procedure. Firstly, it is necessary to choose a name for the company which is legally acceptable. The name to be registered is not necessarily the same as the trading name. The application for the registration will be rejected if the name cannot be distinguished easily from a company which already exists as a registered company. The use of certain words, for example, ‘British’, ‘International’ and ‘European’ may require prior approval before they can be used in a company name. On completion of registration the company will be given a company number, which remains constant throughout its life.

A company is formed upon the issuance of a certificate of incorporation by the appropriate government authority. A certificate of incorporation is issued upon the filing of the constitutional documents of the company together with statutory forms and the payment of filing fee. There are two types of constitutional documents: Memorandum of Association¹ and Articles of Association², also known as ‘Mems and Arts’.

The Memorandum gives the company's name, names of its members (shareholders) and number of shares held by them, and location of its registered office. It also sets out the Company’s objects, or purposes, and it is important to ensure that these properly reflect the company’s intention, for example, the ability to mortgage company property for the purpose of raising finance.

The Memorandum provides the amount of authorized share capital, otherwise known as nominal capital – it is a maximum amount of share capital which can be issued. A company need not issue all its authorized share capital. The Memorandum also states whether liability of its members is limited by shares or by guaranty and what type of contracts the company is allowed to enter into. Most companies are limited companies with the liability of members limited to the nominal value of shares they hold or, less commonly, the amount they guarantee to contribute to the company’s liability on liquidation – if the company is closed and its assets are sold. A company must have a stated number of shares issued to properly identified shareholders.

Almost all of the Memorandum provisions (except those mandated by corporate legislation) can be altered by the company's members by following the prescribed procedures. The memorandum is a public document and may be inspected by anyone, usually at the public office where it is lodged. 

The Articles of Association contain provisions for the internal management of the company, i.e. set out the relationship between the company and its shareholders, the requirements for annual general meetings, or AGMs, and extraordinary general meetings, the board of directors, corporate contracts and loans. The Articles also state the restrictions on share transfer and allotment of new shares, and regulations concerning directors’ powers and duties.

People working for a company

Shareholders – or ‘members’ – of a company are those people who have legal ownership of a share and appear in the company’s register. These people may not actually have beneficial ownership, but simply be a ‘nominee’. However, unless otherwise stated in the company’s articles, only the shareholder himself can exercise the right attached to holding his shares. These include the right to vote and to receive dividends. They also include the ability to enforce rights against the company. It is the shareholders who own a company, and they control what the company does. They can appoint and remove the directors and change the company articles. A shareholder’s rights are set out in the articles and supported by the Companies Act.

The directors of a company are chosen by the shareholders, and their job is to manage the company and decide general policy. In small companies, directors themselves choose how long to remain in position, unless they are forced out. In larger, listed companies, however, it is normal for directors to retire and stand for election annually at the AGM. This is usually a formality. The law states that all directors of listed companies should stand for re-election at least every three years.

Directors act on behalf of the shareholders and should never use the company’s assets as they wish. To this end, their powers to run the company are limited by law and the company’s constitution. A company will have both executive and non-executive directors. The difference is that whereas the executive director is employed by the company and given specific contractual duties, the non-executive director is not an employee and receives a fee rather than a salary. He is not usually full-time and is not involved in the day-to-day running of the company. Both types of directors, however, have the same legal responsibilities.

All in all, there are no mandatory qualifications to become a director of a private or public limited company, though the following persons are disqualified and are not allowed to hold the position:

• an undischarged bankrupt, who has not been released by the court from his debts, unless leave, or permission, is obtained from the court;

• a person disqualified by the court from acting as a company director. If leave is given by a court, it must be for the person to be appointed as a director for a specific company;

• in Scotland, a person under the age of 16;

• anyone over the age of 70 in the case of a plc. This age requirement may be waived, or ignored, in the case of a candidate named by a general meeting of the company.

Although incorporation limits liability, the directors retain personal responsibility to ensure the company compliance with the filing of documents at Company’s House on time, as required by the Companies Act. Failure to do so is a criminal offence and may result in the imposition of a fine together with a criminal record. Present failure to fulfil these duties may lead to disqualification from holding the office of director in the future. The directors must ensure that:

• accounts for limited companies are delivered to the Registrar of Companies within the requested period, normally within ten months of the accounting reference date in case of private limited companies or within seven months in case of a plc, although the requested period may be amended by legislation. The defaulting company may be charged a late filing penalty in addition to any other fine imposed by court;

• annual returns are submitted as specified by the Act. In the event that these are not submitted, and the Registrar believes that the company is no longer operating, he may strike it off the register and dissolve it. Any assets of the company at that point may become the property of the Crown;

• notice of change of directors or their details is provided to the Registrar;

• notice of any change to the registered office is provided to the Registrar. If this is not done, statutory notices may be validly served on the registered office.

The Company Secretary is the chief administrative officer of a company and is appointed or removed by the board of directors. He will normally have appropriate formal qualifications, relevant experience and expertise. He is responsible to the whole board, not only the Chairman or Chief Executive Officer. The role is very important in a company, and the duties are wide ranging and can change from one company to another. Generally, the Company Secretary is responsible for accounting and finance and dealing with personnel. However, with recent increased interest in corporate governance, the Company Secretary is now seen as the guardian of the company’s compliance with both law and best practice. This includes responsibility for compliance with employment legislation, security of documentation, insurance, etc. As a company officer, the company secretary may be criminally liable for a default committed by the company, for example, failure to file the company’s annual return with Companies House in time. An employment contract will usually specify the remit of their duties that is the areas of responsibility, which normally include:

• maintaining the statutory register, for example, the register of members;

• filing the statutory forms, for example notifying changes among the directors;

• serving members and auditors with notice of meetings;

• supplying a copy of the accounts to every member of the company;

• keeping minutes of directors meetings and general meetings.

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