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ZIMSEC O Level Commerce Notes: Terms used in business organisations

Private”

  • Membership to a private limited company is by invitation.
  • Shares of a private limited company are onlys sold to invited members for example friends and relatives.
  • Shares cannot be sold or bought on the Zimbabwe Stock Exchange or transferred publicly.
  • Financial records of a private limited company are not made available for public inspection, perusal or consumption but are submitted only to the Zimbabwe Revenue Authority for tax purposes.
  • A private limited company is usually a family owned business.

Public”

  • Membership to a public limited company is open to members of the public.
  • Membership is by public invitation through a prospectus or advertisements placed in newspapers.
  • Shares of a public limited company can be bought, sold or transferred publicly through the Zimbabwe Stock Exchange.
  • Audited financial records are published in the newspapers.

Stocks

  • Sold by government or local authorities to members of the public.
  • These are government shares, which are sold in bundles of 100 shares or multiples thereof.
  • Gilt-edged securities.
  • A very secure form of investment backed by government.

Annual General Meeting (AGM)

  • A legal requirement for limited companies under the Companies Act.
  • Must be attended by all shareholders or by proxy.
  • Held once a year.
  • Where a Board of Directors are elected decisions are made.

Board of Directors

  • Must hold ordinary shares in order to be elected.
  • They control the business.
  • Elected at an Annual General Meeting.
  • Responsible for the day to day running of the business through the managing director.
  • The managing director reports to the board.
  • Powers are stated in the articles of association.
  • Composed of 2 to 6 members.
  • Draws up the policy of the company.
  • Powers and limitations are stated in the articles of association of the company.
  • Members may or may not be shareholders.
  • Board chooses the managing director.
  • Members of the board are elected by the shareholders at an Annual General Meeting.

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