Trade companies (partnerships)

Trade company (partnerships) is the uniting of material resources of two or more entities to carry out an economic activity. A trade company is formed when an agreement is concluded between them, the procedure for distribution of profits received form an economic activity, as well as other partner relations. Thus, the main internal principles of the law. In this case for the entities who want to found a company it is especially important to conclude an “agreement of foundation” (the analogue of the memorandum of association) to maximally regulate all legal aspects of the company activities and the relationship questions between partners.

In general there are two types of companies (partnerships) in Canada: general partnerships (unlimited partnerships) and limited partnerships.

The main feature of the general partnership (unlimited partnership) is an equal participation of all partners in the partnership’s business and an unlimited liability of all partners for the debts and liabilities of the company, that is each partner or group of partners as a whole.

The distinctive feature of limited partnership is the existence of two categories of partners:

general partners who carry out their activity by analogy with the members of the general partnership, that is they manage and represent the company at the same time carrying out unlimited liability for the enterprise’s liabilities;

limited partners (partners) who participate is the partnership to the extent of the contributions whose amounts determine their business risk. Limited partners do not have the right to manage the company and represent its interests before third parties. Such a partnership is formed when at least one unlimited and one limited partner participate in the agreement on foundation.

It is necessary to stipulate all the peculiarities connected with the foundation of the partnership in the agreement on foundation.

The advantages of the trade companies are the following:

§ simplicity of the procedure for the foundation and the structure of enterprise management;

§ low foundation costs;

§ certain advantages in taxation.

The disadvantages are the following:

§ unlimited liability for general partners;

§ difficulties with the attraction of additional financing;

§ probability of confusing control over management system;

§ risk increase in case of conflicts between partners.

Capital uniting (corporation)is an independent legal entity. It is characterised by the solitary property ownership to which extent it is liable to the creditors and other entities for its debts and other liabilities. It has its own shareholders (founders) liable for the debts only by the property contributed in the authorised capital of the company debts of the company and the company itself is not liable for the debts of the founders. It is characterised by a fixed authorised capital (fund) divided into certain parts (shares). An authorised capital can be changed according to the decision of the founders. The founders (shareholders) get the profit in the form of dividends. Uniting of capital (corporation) is formed on the basis of the documents of association (articles of association in this or that form) and is to be entered into the trade through the authorised body.

There are three forms of the uniting of capital in Canada: a) private company (corporation); b) public company (corporation); c) federal company (corporation). Besides there are three different types of the uniting of capital: limited uniting corresponds to the abbreviation “Ltie”; incorporation – “Inc.”; company – “Cie”. The above-mentioned abbreviations should be used in all the documents of the uniting of capital, including documents of association, blanks, on the nameplates, that is they become an integral part of the name from the time this name was given to the company. The liability of a certain company does not change regardless of its type.

Private company (the analogue of a closed joint stock company and limited liability partnership in Ukraine) is an enterprise formed by one or several persons. To form the company the majority of the company’s directors should carry out business on the territory of Canada. Moreover, if none of the directors is present in the province, where a private company carries out its primary activities, this company is obliged to appoint the third person authorised to represent its interests and to act on behalf of the company in such a province. The distinctive feature of the private company is that it has no right to a public issue of securities (shares) and its free sale in the stock market for a wide range of people.

Public company (in fact a prototype of an open joint stock company) provides a public issue, free subscription and sale of its securities (shares) in the stock market. Besides the obligations for registration of documents of association such a company is obliged to make a registration with the Security Commission located in the province according to the company’s domicile. Moreover, a public company should audit its activities and publish (present to the state bodies) financial statements for every six months.

Federal companies. In compliance with the provisions of the Law of Canada “On Corporations” private and public companies (corporations) can be founded in the form of a federal company (corporation). A compulsory requirement is running business in more than one of Canadian provinces and the state registration of such business in every province. A general company status is beneficial from the business point of view, that is the above-said Law stipulates certain privileges including an additional access to the documents of the Corporation Administration of the Ministry of Industry of Canada.

Uniting of capital (corporation) has the following advantages:

– limited liability;

– structured management system;

– consistency;

– solitary property;

– advantages in the attraction of capital.

Disadvantages:

– full regulation;

– this is the most expensive form of an enterprise;

– existence of documents of association limiting the fight and freedoms;

– liabilities for keeping registers, undergoing examinations and making statements;

– dividends are subject to taxation.

Co-operative is an association formed by the persons (shareholders) united by common targets and needs for an acquisition of goods and services and also for the split of their resources in order to increase personal income. The given legal form stipulates the following:

– regardless of the investment (share holding) into the co-operative all shareholders have equal rights in voting;

– open and voluntary entry;

– limitation of profits (interest) depending on the authorised capital of the co-operative;

– providing discounts to shareholders for purchased goods and services.

According to their functions there are five types of co-operatives in Canada, such as:

a)co-operatives of producers, combining all best qualities and capabilities of shareholders to obtain mutual benefits. We speak about the sale of shareholder’s goods and services in the common market;

b)co-operatives of consumers who buy goods and resell them to the shareholders on the mutually beneficial basis. In this case we speak about co-operatives of retail trade for cash on delivery;

c)co-operatives manufacturing products for the further sale in the market (as a rule, ordinary products: milk products, fish, meat, poultry);

d)financial co-operatives which provide such financial services to the shareholders as: opening deposit accounts and other bank accounts, providing an opportunity for the investment and obtaining loans, insurance services;

e)co-operatives specialising in providing services in the social sphere: in the sphere of health care, child-minding, etc. aiming at service quality improvement and price decreasing, etc.

The advantages are as follows:

– all the property is at the disposal and management of shareholders;

– equality in voting;

– limited liability;

– distribution of profits between shareholders.

The disadvantages are as follows:

– long procedure for decision making and conflict risk between shareholders;

– success of the activity depends on the participation of all members;

– low level of the attraction of additional capital;

– liabilities for keeping records and registers.

The important feature is that enterprises of each type have the right to form subsidiaries, branches, representative offices, departments and other subdivisions eligible to open accounts and have the right to approve the provisions related to them. The difference between a subsidiary and other above-said subdivisions is that a subsidiary is a legal entity and an owner of the property transferred to it by a parent company, and branches, representative offices and departments receive the property from the parent company to carry out their activities on the right of management.

Reading tasks

A. Understanding main points. Answer these questions:

1. How are the activities of individual enterprises regulated?

2. What is the difference of an individual enterprise?

3. What is the owner of an individual enterprise liable for?

4. What is necessary to do to form a trade company (partnership)?

5. What is the main feature of the general partnership?

6. What are the peculiarities of a partnership?

7. What are corporation shareholders responsible for?

8. What are the forms of the uniting of capital in Canada?

9. What is the feature of all forms of business?

10. Why does a federal company statгus beneficial?

Date: 2016-04-22; view: 856