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    Etp Ez

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    alvin andrean
    Limited liability benefits individual shareholders in two key ways: 1) it encourages investment by protecting shareholders from liability for corporate acts, and 2) it protects personal assets from claims against the corporation. Limited liability makes it easier for companies to attract new shareholders by providing this protection. A sole trader may not want to convert their business into a partnership because they currently enjoy all the profits alone, rather than having to share profits with partners. Companies can convert from public to private companies by individuals buying a majority of shares. Reasons for doing this include feeling the company is undervalued publicly, wanting more flexibility to make strategic changes, reducing public scrutiny and costs.

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    Etp Ez

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    alvin andrean
    17 views2 pages
    Limited liability benefits individual shareholders in two key ways: 1) it encourages investment by protecting shareholders from liability for corporate acts, and 2) it protects personal assets from claims against the corporation. Limited liability makes it easier for companies to attract new shareholders by providing this protection. A sole trader may not want to convert their business into a partnership because they currently enjoy all the profits alone, rather than having to share profits with partners. Companies can convert from public to private companies by individuals buying a majority of shares. Reasons for doing this include feeling the company is undervalued publicly, wanting more flexibility to make strategic changes, reducing public scrutiny and costs.

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    etp ez

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    Limited liability benefits individual shareholders in two key ways: 1) it encourages investment by protecting shareholders from liability for corporate acts, and 2) it protects personal assets from claims against the corporation. Limited liability makes it easier for companies to attract new shareholders by providing this protection. A sole trader may not want to convert their business into a partnership because they currently enjoy all the profits alone, rather than having to share profits with partners. Companies can convert from public to private companies by individuals buying a majority of shares. Reasons for doing this include feeling the company is undervalued publicly, wanting more flexibility to make strategic changes, reducing public scrutiny and costs.

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    17 views2 pages

    Etp Ez

    Uploaded by

    alvin andrean
    Limited liability benefits individual shareholders in two key ways: 1) it encourages investment by protecting shareholders from liability for corporate acts, and 2) it protects personal assets from claims against the corporation. Limited liability makes it easier for companies to attract new shareholders by providing this protection. A sole trader may not want to convert their business into a partnership because they currently enjoy all the profits alone, rather than having to share profits with partners. Companies can convert from public to private companies by individuals buying a majority of shares. Reasons for doing this include feeling the company is undervalued publicly, wanting more flexibility to make strategic changes, reducing public scrutiny and costs.

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    Etp cambridge

    Alvin andrean / xipa / 4\

    A. How does the existence of limited liability benefit an individual share holder?
    The benefits associated with limiting shareholder liability is twofold. First, by protecting shareholders
    from liability for the acts of the corporation, individuals are willing to invest in the enterprise. Absent
    shareholder limited liability, obtaining investors for a corporation becomes a significant challenge.
    Second, limited liability protects the personal assets of a shareholder from claims made against the
    corporation.

    B. Does limited liability make it easier or more difficult for companies to attract new shareholders? Explain
    your answer.

    Limited liability is immaterial to attracting new shareholders. I can always require that you
    sign a personal guarantee, regardless of the company’s limited liability status. At the same
    time, I would want the company I invest in to be protected from outside claims (so that it
    doesn’t extend to me personally as an investor in the company) through the legal structure
    of limited liability.

    C. Explain why a sole trader might not want to convert the business into a parnertship.

    A sole trader might not want to convert the business into a partnership because
    at the moment, he/she might be enjoying with all the profit, but if he converts it to
    a partnership, he might have to share the profit.

    D. . It is possible to convert a public limited company back into a private limited company. This done by
    individuals buying up a majority of the shares. Richard Branson did this several years ago with the virgin
    group. Why Mike and Gita have wanted to do thois with the express Taxi and Bus pic?

    It could be for various reasons but I think the most common ones would include the
    following:

    1. Value - They feel their company is undervalued by the public markets. If this is


    the case there is upside value in listed share price.
    2. Market swings - A change in the public market’s appetite for that
    particular business may suggest a different path is better for the monetization of
    shareholders stock.
    3. Scrutiny - They want to make strategic transition in the business model and/or
    market and feel going private would be better to make the transition or a
    better operating environment  - or both.
    4. Costs - The benefits of being public are no longer perceived to justify the costs.
    This is not always just a hard cost consideration.
    The reason companies go public is to raise money via the IPO and to provide investors and
    shareholders with a route to liquidity.

    You can have a very sound business with good growth and earnings etc. However, that does
    not mean that it suited to the public markets or even institutional investment. The decision
    makers (in this case the Board) may have started out with an ambition to go public for
    whatever reasons.

    This ambition may have changed but a very decent business has been built. A decision to
    operate a lifestyle business may be the simple reason the directors wish to delist.

    Even if the business is suited to being public - it may not be the best environment for its
    leaders. Richard Branson is example of someone who did not like operating as a public
    company after an IPO. He subsequently took the company private.

    The short answer is because they can and they want to.

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