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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. 
 
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CHAPTER 1
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BUSINESS ORGANISATIONS AND THEIR STAKEHOLDERS