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PRIVATE COMPANY (FACTORS RELATING TO A PRIVATE COMPANY (Name: Name must…
PRIVATE COMPANY
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CHARACTERISTICS
- ONE TO UNLIMITED NUMBER OF SHAREHOLDERS
- NAME MUST END WITH (PTY) LTD
- CAPITAL INVESTED IS DIVIDED INTO SHARES
- NOT ALLOWED TO TRANSFER SHARES
- PERMISSION OF OTHER SHAREHOLDERS IS NEEDED BEFORE 1 CAN SELL OR GIVE HIS SHARES TO SOMEONE ELS
- MINORITY OF SHAREHOLDERS MAY CALL A MEETING
- examples: Woolworths (Pty) Ltd.
- (PTY) LTD : PROPRIETARY LIMITED
DISADVANTAGES
- COMPANIES MUST COMPLY WITH LEGAL REQUIREMENTS
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- HIGH COSTS IN ESTABLISHING A PRIVATE COMPANY
- LITTLE PERSONAL CONTACT BETWEEN SHAREHOLDERS AND CUSTOMERS
- CANNOT SELL SHARES TO THE PUBLIC
- TRANSFER OF SHARES IS RESTRICTED
ADVANTAGES
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- CAN APPOINT SKILLED AND KNOWLEDGEABLE MANAGERS
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DEF: A company has the incentive to make a profit and a private company can not sell shares to the public.