Investing in a Limited Company

When a limited company has started trading, you do not invest in shares by giving more capital to the company. You buy them from one of the shareholders. If it is a private limited company, a shareholder can only sell shares if all the other shareholders agree. If it is a public limited company, shares can be bought and sold freely, usually at a Stock Exchange. If the company is doing well and paying high dividends, then you might pay more than the face value of the shares. If it is doing badly, you might pay less than the face value of the shares. The price you pay at the Stock Exchange (or to a shareholder) for your shares is their market value. If the company fails, it will stop trading and go into liquidation. This means that all the company's property and equipment (its assets) must be sold and the money from the sale will be used to pay any more money. In other words, the shareholder's liability for debts is limited to the value of their shares.

On the other hand, if you are an owner of a business which is not limited, for example a sole proprietorship (owned by one person) or a partnership (owned by between 2 and 20 people) and your business fails, you will go bankrupt. In this case you might have to sell your own private possessions (your house, car, furniture etc.) to pay all your creditors. In other words, sole proprietors and partners have unlimited liability for their firms debts.

THE STRUCTURE OF A COMPANY

Organization structure in business is very important. People in a company, its employees hold different positions.

The relationship between those employees with different positions makes organization structure.

At present most firms are divided into their major parts: capital (shareholders); management; labour. Let us take a typical company. There is a director who is a senior manager. He sets up the Board of Directors under the authority of the President. The Board decides what company policy and expenditure must be.

The chief executive officer (CEO) is the link between the Board and the senior management.

As for middle managers, they run departments of a firm. They account to the senior management for their area of the work done.

There is a difference between executive directors and non-executive ones. The directors who run their firm on day-to-day basis are called executive directors. Those who sit on the Board and do not run the firm directly are called non-executive directors. In modern American English they use also the term inside directors for executive and outside directors for non-executive ones.

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