a) Indicate two differences between Articles of Association and Memorandum of Association. b) State four advantages and four disadvantages of a public limit...

Answer Details

(a) Two differences between Articles of Association and Memorandum of Association

(A further difference: the memorandum is the supreme/superior document, so where the two conflict the memorandum prevails.)

(b) Four advantages of a public limited company

1. Large capital. It can raise huge amounts of capital by selling shares and debentures to the general public.
2. Limited liability. Members' liability is limited to the amount unpaid on their shares, protecting personal property.
3. Continuity of existence. It has perpetual succession; it continues to exist despite the death, retirement or insolvency of members.
4. Transfer of shares. Shares are freely transferable, so members can sell their shares easily.

(Also acceptable: economies of large-scale operation; employment of skilled specialists.)

Four disadvantages of a public limited company

1. Difficult and costly to form. Its formation involves many legal formalities and expenses.
2. Lack of secrecy. It must publish audited accounts and file returns, so its affairs are open to the public and competitors.
3. Separation of ownership from control. Shareholders (owners) do not manage the company; salaried directors may not always act in the owners' best interest.
4. Slow decision-making. Its large size and formal procedures make decision-making slow and bureaucratic.

(Also acceptable: subject to heavy government regulation and double taxation.)