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Company law. How to raise funds from public - Essay Example

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Company law. How to raise funds from public

Transferability of shares in the stock exchange. Stocks and shares of a public limited company can be easily traded in the stock exchange and can be converted into cash on the fair market value of shares.
Unlimited numbers of members. There are no restrictions on the number of members for a public limited company.
Ease in borrowing funds from banks and financial institutions. Due to its better-understood corporate form and credibility of financial disclosures, banks and financial institutions can offer funds rather easily than a private limited company.

The disadvantages regarding opening of a public company are enlisted below

Non restriction in transference of shares. Due to non restriction in transference of shares, it is easy for people to interfere into the management by purchasing shares.
Much more legal formalities and compliance of laws regarding decisions.
Business cannot be commenced prior to certain legal formalities.
Much more paperwork and recording requirements are observed.
On conversion of a public limited company into private limited company, much legal formalities are involved.
The accounts of a public limited company should be published and dispatched to the shareholders at their registered addresses.



Question: What are the roles of director and duty of care of director

Answer 2:
Duties of care and skill
In contrast with the extensive duties of good faith, which largely restrict certain acts conflicting with the director's duty to his company, a director has duties of care and skill which are positive side to promote the welfare of the company. (Charles worth, Morse (1998)


(a) The test of skill
The traditional test has been...
It may be more difficult to raise capital for a private limited company, as investors may be more comfortable investing funds in the better-understood corporate form with a view toward an eventual initial public offering.
Raising funds from public by means of issuance of share capital. It is much easier for a public company to raise its capital than a private limited company, since investors are more comfortable in investing funds in the better-understood corporate form with a view towards an eventual initial public offering.
Transferability of shares in the stock exchange. Stocks and shares of a public limited company can be easily traded in the stock exchange and can be converted into cash on the fair market value of shares.
Ease in borrowing funds from banks and financial institutions. Due to its better-understood corporate form and credibility of financial disclosures, banks and financial institutions can offer funds rather easily than a private limited company.
In contrast with the extensive duties of good faith, which largely restrict certain acts conflicting with the director's duty to his company, a director has duties of care and skill which are positive side to promote the welfare of the company. (Charles worth, Morse (1998)
The traditional test has been that a director need not display in the performance of his duties a greater degree of skill than may reasonably be expected from a person of his knowledge and experience. ...Show more

Summary

Restricted transfer of shares. The owners and members of a private company work like a family, due to such small number of its members. No other person can interfere into the management simply by the purchase of its shares.
Immediate commencement of business…
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