2. Text 1 comprehension questions

Read the text again and answer these questions.

1. What is the main difference between a public and a private company?

2. If a company is in debt, can creditors sue the managing director?

3. In what case can creditors sue individual shareholders?

4. Why do you think companies limited by guarantee are not used for trading?

5. How exactly did the ultra vires rule allow a dishonest trader to avoid payment for ordered goods? Give an example.

6. Which forms of business must submit to the public inspection of accounts and compulsory audit?

7. What is the greatest disadvantage of raising capital by means of debentures?

3. True-false statements

Confirm or refute these statements. Begin with a short answer, e.g. ‘Yes, it is/has/does, etc.’ or ‘No, it isn’t/hasn’t/doesn’t, etc.’ and add one sentence to prove your point.

1. If a partner was unaware of the order made by his colleague partner and which brought the partnership into debt, he can refuse to be held liable.

2. Creditors can sue a partnership as a legal entity, in its own name.

3. Creditors cannot sue a company in its own name.

4. In a company limited by shares members’ liability is limited to the nominal value of their shares.

5. In an unlimited company members’ liability is not limited to the nominal value of their shares.

6. The authorised share capital is the amount of capital actually held by shareholders.

7. The holders of loan capital are company members.

4. Types of business Note-taking

Read the text carefully again and complete the table. Use these notes to characterise each type of business.

	Sole trading	General partnership	Limited partnership	LLP	LLC	plc	Unlimited company
liability	unlimited
corporate personality				+
owned by						share­ holders
managed by
min. capital requirement	-
compulsory registration
accountability*

*public inspection of accounts and annual audit.