BGS W1
Sole Proprietorship- business owned by a single person (the person has the most say & is
entirely liable for debts etc)
Eg. Lawyers, accountants and book keepers
Partnership- jointly liable, two or more partners
Limited Partnership- Limited partner does not take part in the management& not liable for
debts
Limited Liability Partnership (LLP)- 2 or more partners, a body corporate (that is separate
from the partners), liability is limited to your actions
Company- legal entity with a legal existence. The concept of a company is artificial. Can be
formed/ created.
Limited liability company- liability in limited, increasing the tendency to invest
Unlimited liability company- fully responsible for the debts
Companies limited by guarantee - members do not own shares but will contribute when the
company is in trouble
Cooperative- group of people who come together to pool resources to promote self
interests
Company Limited by Shares Co-operative
Predominantly for profit Promote interests of members
No legal limit to the number of shares 1 member 1 vote
owned by an individual
Usually cannot return shares to get back Usually can return shares to get back
capital capital
Can transfer to third parties but may be Usually cannot transfer shares to third
restricted for private companies party
Social enterprise- to both make profit and to achieve social purposes
Unit trust- trust arrangement involving 3 parties, namely, the trustee, the manager and the
investors. A trust is an arrangement where a trustee(s) holds property for the real owner
called the beneficiary
REITS- Real Estate Investment Trust. It takes the form of a unit trust but invests
predominantly in real estate
Chitfund- In a Chit Fund a group of persons each contribute an equal amount into a pool. On
an agreed day each person can bid to borrow the money in the pool. The pool is lent to the
person who is willing to pay the highest interest
CIC Community Interest Company- its activities are being carried on for the benefit of the
community. The assets of a CIC are locked up for charitable purposes. The disposal or
transfer of the assets is restricted by regulation
Low Profit Limited Liability Company (L3C)- It is non-profit in that it must have a primarily
charitable purpose with profit making as a secondary purpose. It is for-profit in that the
investors are entitled to distributions and appreciation in their investment.
Benefit Corporation- Benefit corporations are a new class of corporations that are intended
to "create a material positive impact on society and the environment, taken as a whole,
assessed against a third party standard."
Foreign Businesses- it can register itself as a branch or a subsidiary in the host country. It
engages in business through a local agent or distributor.
Societies- people coming together with a common purpose. They can sue/ be sued, but
cannot be enforced a judgement.
Trade Unions- to promote the interests of employees and employers.
Non Profit Organizations- main objective is not proft
Non Governmental Organizations- Independent of the government
Mutual Benefit Organizations- members will pool funds in times of need. (eg. Organizations
for relief or maintenance of family member)
Board of Committee- to assist the board of directors.
Board of directors may be busy – board of committee assists to make smaller
decisions that does not require the board of directors.
Two-tiered Boards- supervisory and management board.
Management- manages the business. (eg. CEO, Managing Director, General Manager)
Secretary- preparing documents and calling for meetings for the directors,
trade/proceedings secrets that cannot be divulged – trusted people.
Employees: employed to do work.
Auditor- chosen by the directors to check the financial statements and detect fraud.
Members (sense of belonging)/Shareholders/Stockholders- owners of the company owns
shares/holding power.
IND DIRECTORS (In Singapore, independent of everyone else)
-Independent of executives (to provide checks on the executives)
-ind of executives + major shareholders (to prevent the overpowering of the major
shareholders)(take care of the interests of the min shareholders)
-ind of executives + all shareholders (look after the interests of the employees) (third party-
government eg industry)
Chairperson: Chairing the meeting, facilitating
NON EXE DIR
-Independent of the Executives (Directors who are not executives)
DIRECTORS
EXE DIR NON EXE DIR
(NOT IND)
IND DIR NON IND DIR (eg wife of CEO)
(ttly ind)
CHAIRMAN- may or may not be exe (1 or 2)
CEO/general manager- manage the company (top of management) (2)
-may not be a director
EXE-manage people hence not ind
Directors EXE NON EXE
(in the management) (Eg. (may not be paid highly due
Chief executive officer, chief to insufficient
financial officer) effort/knowledge in the
company)
IND If u manage people you’re -non exe chairman
-exercise independent non independent. NIL -non shareholder
business judgement (all non exe directors are
-provide checks on the independent) (with the
executives exception of wife of CEO)
NON IND -executive chairman Wife of CEO (if her
-managing directors judgment is affected by her
husband)
Conflict of interests-
company vs personal/self
company vs non company (eg. Favouring of other people- friends/family)
Receivership- when company fails to pay back its debts, the bank has the rights to appoint a
receiver to take control of some of their factories.
Scheme of arrangement- the members and creditors agree to restructure the debts of the
company.
Judicial Management- when the company is going thru restructure, the court allows the
company to undergo a time to rehabilitate under judicial managers.
Executive directors: 2
Non-executive directors: 1
Independent directors: 1
Non-independent directors: 1 or 2
Problem Description Measures
Legal Natural Artificial Person Wind up company
Personality Person (companies) Fine company
(people) Punishments
-Limited -Unlimited Agents to act for company
Life span (Theoretically
- Uncertain forever)
-Has a -imaginary body
physical with no one to
person to hold liable for
hold liable problems
-Has a -Is global/ no
specific where/ no
location particular place
-It is a
legal/mental
construct
Limited -Encourages the members to
Liability take risks
-may be abused by members
as nobody may be willing to
be held liable
Conflict of -Management may run the Improving the Composition of the Board
Interests & company without the of Directors A better board of directors
problem supervision of the directors is hopefully more able to supervise and
with direct the management.
corporate
structure ● Establishing Board Committees Board
committees with clear lines of
responsibility over specific issues will
hopefully lead to better decision making
and oversight.
● Enhancing the Shareholders’ Role
Another way to address the agency
problem is to enhance the shareholders’
role. The shareholders can take a more
active role in scrutinising the activities of
the managers. Shareholders can form
coalition to pursue their agenda and
push for relevant resolutions.
Shareholders can sue the directors
● Whistleblowing Mechanism
Whistleblowing provisions and
procedures can be implemented to help
anyone in the company to tell on their
wrongful colleagues and bring to light
anything improper.
● Tightening the Laws and Issuance of
Codes Appropriate regulations and
enforcement are essential to prevent
misconduct by directors and managers
F&N
Lee Hsien Yang – consultant and non-executive chairman
Why do they give him 2 roles: Temasek made an investment
CONFLICT NO CONFLICT
Chairman agrees with consultant LHY is absent from meetings
LHY still has influence Independent voting
Gives bad meeting He excuses himself
Royalty- pay to use the name of the company to reduce the profits of the company
LIABILITY
Limited- do not shoulder the entire responsibility (shareholders)
Unlimited – shoulder everything, possibility of going bankrupt
**it is difficult to target the manager who is responsible (MF GLOBAL - pls read)
Characteristic Why Problem Case Eg Solution
s
Legal -Convenience -Difficulty in -Opennet -Starbucks -Having more rules
Personality of facilitation pinning the blame (Singtel (evasion of -Eg. Make singtel
(people in the -Lifespan is -Difficulty in wants to taxes/royalty not the majority
eyes of the infinite locating people control ) shareholder
law) (certain) responsible Opennet, (evasion of -eg. Have more
-Liabilities but it regulations rules to prevent tax
- cannot, through the evasion
Representation thus it creation of
of many transfers companies)
people its shares -use legal
- Facilitates to to persons to
business Citynet) evade taxes
-business
trust
structure
Limited - -Excessive Risks -MF -Lehman -Legal solution
Liability Encouragemen that danger the Global Brothers -question of who
(shareholders t of risk-taking company (the should be
are only liable (because they - No one person responsible
to the amount have little responsible (eg. who was - can you go after
they are liability) (eg. bankruptcy) at fault directors/managers
willing to Investors) -uncalculated Risks was not ?
invest) (go after the registered
directors/manager )
s hard to prove
what exactly they
did wrongly)
Agency -always -conflict of -F&N -selling -include an approval
(to act on present in interests asset/produc process/stage for
behalf of the cases of (bet company t to a shareholders to
company) companies interests and company at align interests
-managers, self/3rd party an inflated -independent
employees etc interests) price Directors (or legal
-company -pay yourself processors)
cannot a high salary -Morals
represent itself -injection of
-legal construct assets
Corporate -giving -unaware of what -Enron -Barings Bank -legal rules
Structure everyone a the other levels -more transparency
role to play to are doing -good managers
improve -abuse of power of
efficiency higher levels
-checks and -centralization of
balances power
-hierarchy
Citynet – Trustee Manager (legal owner) business trust
Singtel – Unitholder (background owner) business trust
OpenNet – use (fibre optic network)
How to evade tax
Furniture BVI royalty Furniture Singapore (tax 17% in Singapore to 10%)
(tax haven) (profit becomes $0)
