PART A: THE BUSINESS ORGANISATION, ITS STAKEHOLDERS AND THE EXTERNAL ENVIRONMENT
10
CASE STUDY
The United Nations (UN) has various NGOs, such as UNESCO (UN Educational, Scientific and Cultural
Organisation) and UNICEF (UN Children's Fund).
2.6 Co-operative societies and mutual associations
Co-operatives are businesses owned by their workers or customers, who share the profits. Here are some
of the features they have in common.
Open
membership
Democratic control (one member, one vote)
Distribution of the surplus in proportion to purchases
Promotion of education
Although limited companies also have some measure of democratic control, this is on the basis of one
share, one vote. So one shareholder could dominate a company if they hold a majority of shares. This
would not happen in a co-operative.
CASE STUDY
A major example of a co-operative in the UK is the
Co-operative Retail Store
network. In addition there
is the
Co-operative Wholesale Society
and the
Co-operative Bank
.
Mutual associations
are similar to co-operatives in that they are 'owned' by their members rather than
outside investors.
(a)
Some financial companies
used to be mutual associations. However, building societies in the UK
such as the Halifax converted from being mutual associations to being banks. The Nationwide
Building Society has held out against this, so far citing the lower interest rates it can offer to
borrowers.
(b)
Credit unions
are examples of mutual associations. They are financial institutions owned and
controlled by their members.
QUESTION
Legal form
Florence Nightingale runs a successful and growing small business as a sole trader. She wishes to
expand the business and has her eyes on Scutari Ltd, a small private limited company in the same line.
After the acquisition, she runs the two businesses as if they were one operation making no distinction
between them. What is the legal form of the business she is running?
ANSWER
This is quite a tricky question. For example, if suppliers have contracts with Scutari Ltd, the contract is
with the company, and Florence is not legally liable for the company's debts. If their contracts are with
Florence, then they are dealing with her personally. Florence has to make a choice.
(a)
She can run the entire business as a sole trader, in which case Scutari Ltd's assets must be
transferred to her.
(b)
She can run her entire business as a limited company, in which case she would contribute the
assets of her business as capital to the company.
(c)
She can ensure that the two business are legally distinct in their assets, liabilities, income and
expenditure.
BPP Tutor Toolkit Copy
CHAPTER 1
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BUSINESS ORGANISATIONS AND THEIR STAKEHOLDERS
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