QUESTION 4

Duties of a shareholder in a company

Shareholders are considered companies’ financial supporters. They provide the finance the company needs to purchase the shares of the company. Even though they can also be the directors of the company, they have more control over the company’s operations. As outlined in the Companies Act 2006, and the company’s Articles of Association, shareholders have the rights, duties and roles to perform.

1. Under the Companies Act 2006, shareholders have the role of making major decisions that would affect the shareholders’ rights. These decisions must be approved at a general meeting called by the company’s directors by the way of special resolution. Therefore, shareholders are required to attend meetings and discuss necessary agendas to ensure that the directors do not misuse their power.
2. Shareholders also play the roles of reviewing the company’s accounts and enquiring from the directors about the decisions they have made. According to Section 336 of the Companies Act 2006, companies must hold annual meetings at least six months after its accounting reference date during which the shareholders can extend these duties.
3. Shareholders have the powers to make crucial decisions that may affect the operations of the company. These include: changing the name of the company, removing underperforming directors from office and authorizing service contracts from a director among others. These allow them to exercise ultimate control over the company and how it is managed as the shareholders’ votes are highly regarded in general meetings.

QUESTION 5

Ways in which a public company may raise its capital

Companies raise funds in a variety of ways:

1. Issuing stock: Public companies’ shares are sold to anyone with enough money to purchase those shares. However, the company is unable to derive any capital from the stock sale unless the stock is sold directly to the prospective buyer. Once the company receives funds from that sale to the public at any time, the subsequent sales of that share of stock go to the investor owning it rather than being a source of additional funds to the company in question.
2. Sales of goods and services: This is the most common way of raising capital as it only requires consumers to buy the company’s products and the sale helps to fund the company.
3. Issuing bonds: companies can get capital by issuing bonds that will mature at some point in the future. After an individual buys the corporate bond, the company collects the sale price and deducts the required discounts after which the funds are used as loan.
4. Trade credit: Businesses pay cash on delivery when buying goods or may promise to pay for the goods at a future date, otherwise known as a trade credit.
5. Borrowing from banks and other companies: Companies can borrow money from other business or apply for and receive loans from local and state governments. They can also take advantage of the programs that offer direct compensation for certain activities such as training programs.

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