Company Theory
- Companies have continuity [can carry on existing if the ownership changes]
Terminology
- Finance costs = interest expense
- Goodwill [determined by an actuary] = an intangible asset [the value that we
rate the reputation that our company has] → if you were to sell a company
with lots of goodwill, it would add to the cost
- Capital and reserve = shareholders equity
Ltd [limited]
- Limited liability = the owners share in the business is all they can lose/ their personal
assets are safe.
- Companies must put limited in their official names so that if people invest in the business
they know that their investment won't be at risk if the company goes bankrupt
- All companies by law have got limited liability
Continuity
- The company will be able to exist, even if ownership changes.
Legal autonomy/legal personality
- the company can enter into contracts in its own name/ can sue and be sued
- Separate legal entity from owner
Shareholders
- When a company starts they give out a certain amount of shares
Shareholders Board of Directors
- Owners - Decisions/control
- Any average citizens who have - CEO
bought shares - CFO
- Registered with their ID number - Chair
JSE
- Johannesburg securities exchange
- A market where one can buy/trade/sell shares
Controlling share
- Own one more vote than 50% of the total shares
- Able to make the decisions
, Private vs Public companies
- Public companies statements = available to the public/any citizen (on JSE and anyone
can buy shares)
- Private = one must request board/directors for shares (investing in company is a private
transaction between company and investor)
Separation of ownership and control
- Directors can be prosecuted if they fail their duty of care
Public Company Private Company
- Ltd - (Pty) Ltd
- 7 or more shareholders - 1 or more shareholders
- At least 3 directors - At least 1 director
- Public can buy shares at start-up. A - Public is not invited to buy shares.
prospectus is issued.
- Shares are freely transferable on JSE. - Not freely transferable (not listed on
JSE).
- Financial statements must be - Financial statements don't have to be
published. published.
- Financial statements must be audited. - Have to be audited if they are “high
public interest”.
- Prospectus = tells you about the company and what they do [almost like an
advertisement for a public company]. Document explaining what the company plans to
do, inviting investors to buy shares.
Only issued at startup, after that you have to buy shares on the JSE
- Internal auditor = works for the business and checks internal controls [NOT fraud].
Eg. check to see if the alarm protecting the car is good, not if the cars are being stolen.
- External auditor = works outside the business and expresses an opinion on the financial
statements.
Their opinion can be:
- Qualified :/
= you accept their opinion but you have some concerns
- Unqualified :)
= you accept their opinion without concerns
- Disclaimer :(
- Companies have continuity [can carry on existing if the ownership changes]
Terminology
- Finance costs = interest expense
- Goodwill [determined by an actuary] = an intangible asset [the value that we
rate the reputation that our company has] → if you were to sell a company
with lots of goodwill, it would add to the cost
- Capital and reserve = shareholders equity
Ltd [limited]
- Limited liability = the owners share in the business is all they can lose/ their personal
assets are safe.
- Companies must put limited in their official names so that if people invest in the business
they know that their investment won't be at risk if the company goes bankrupt
- All companies by law have got limited liability
Continuity
- The company will be able to exist, even if ownership changes.
Legal autonomy/legal personality
- the company can enter into contracts in its own name/ can sue and be sued
- Separate legal entity from owner
Shareholders
- When a company starts they give out a certain amount of shares
Shareholders Board of Directors
- Owners - Decisions/control
- Any average citizens who have - CEO
bought shares - CFO
- Registered with their ID number - Chair
JSE
- Johannesburg securities exchange
- A market where one can buy/trade/sell shares
Controlling share
- Own one more vote than 50% of the total shares
- Able to make the decisions
, Private vs Public companies
- Public companies statements = available to the public/any citizen (on JSE and anyone
can buy shares)
- Private = one must request board/directors for shares (investing in company is a private
transaction between company and investor)
Separation of ownership and control
- Directors can be prosecuted if they fail their duty of care
Public Company Private Company
- Ltd - (Pty) Ltd
- 7 or more shareholders - 1 or more shareholders
- At least 3 directors - At least 1 director
- Public can buy shares at start-up. A - Public is not invited to buy shares.
prospectus is issued.
- Shares are freely transferable on JSE. - Not freely transferable (not listed on
JSE).
- Financial statements must be - Financial statements don't have to be
published. published.
- Financial statements must be audited. - Have to be audited if they are “high
public interest”.
- Prospectus = tells you about the company and what they do [almost like an
advertisement for a public company]. Document explaining what the company plans to
do, inviting investors to buy shares.
Only issued at startup, after that you have to buy shares on the JSE
- Internal auditor = works for the business and checks internal controls [NOT fraud].
Eg. check to see if the alarm protecting the car is good, not if the cars are being stolen.
- External auditor = works outside the business and expresses an opinion on the financial
statements.
Their opinion can be:
- Qualified :/
= you accept their opinion but you have some concerns
- Unqualified :)
= you accept their opinion without concerns
- Disclaimer :(
