Text 1 The Corporation

The corporation is a legal form of enterprise designed to take advantage of large-scale production methods by pooling the wealth of many people into a single enterprise while at the same time maintaining centralized control over, and responsibility for operations. Unlike partnerships, which are established by private agreement among the partners, a corporation can be established only by a charter from the state. Indeed, in the days when most farming, manufacturing, and commercial businesses were small enough to be carried on as proprietorships and partnerships, corporate charters were issued only by а special act of the state legislature. The corporation was looked upon as a very special form of business organization largely restricted to such enterprises as canal and railroad companies, for which huge agglomerations of wealth were essential. With the development of mass production technology and increase in the amount of capital needed for efficient operation, the economic advantages of the corporate form grew rapidly.

When a corporation is established by a small group of owners, the owners merely contribute funds or property to the newly chartered company in exchange for shares of stock. However, it’s a promoter who undertakes to form a company with reference to a given project and to set it going, and who takes the necessary steps to accomplish this purpose. A promoter is anyone who participates or has an interest in setting up the company, but not someone involved in a purely professional capacity, such as a lawyer. The promoters are often the company’s first directors. When funds are to be raised from a large number of people, the frequently informal arrangements between promoters may not suffice. The first step for the promoters then is to formally register, or incorporate the firm. Nowadays in the USA corporate charters are issued usually by state bureaus.

Corporation is a legally chartered organization that is a separate and legal entity apart from its owners. Since the corporate charter establishes the corporation as a legal entity distinct and separate from its owners, the corporation is said to be a “legal person”. That is, the firm itself is legally treated like a person and can make contracts in its own name and can sue and be sued like a real person.

Corporations can be classified as domestic, foreign, or alien. A domestic corporation is one that is incorporated in the state that is doing business. In other states where it plans to do business, it must register as a foreign corporation. If it plans to do business in another country, it must be registered as an alien corporation.

Corporations owned by a very small number of shareholders are called close. A close corporation is one that is privately held. That is, its stock is not traded on the stock exchanges and all the stock is held by a relatively small number of people. On the other hand, an open corporation is owned by a large number of shareholders. These corporations are also referred to as publicly held or public corporations. The stock of these corporations is traded publicly on stock exchanges.

The phrase «going public» indicates a situation where private corporations offer shares of stock for sale to the general public in the hope of raising money to finance growth. The opposite of this action is indicated by the phrase «taking a corporation private». This means one or a few shareholders or corporate officers buy the stock owned by other shareholders, and a formerly open corporation becomes a close corporation. Acting like that they make a formally “open” corporation a “close” one.

Assignment to text 2:

1. Read the text and explain the meaning of the word “flotation”.

2. Look through the text once more and find the words or word-combinations which would substitute the word “flotation” and word-combination “raising finance”.

3. What types of securities are described in this text?

4. Divide the text into some logical parts. Mark the key sentence for every paragraph. Make annotation of the text using the following key-patterns:

· The article deals with…

· As the title implies the article describes…

· It is specially noted…

· … is discussed in detail.

· Much attention is given to…

· It should be emphasized that…

· The article gives a detailed analysis of…

· It draws our attention to…

· The text gives valuable information on…

· The text is of great help to…

· The article is of interest to…

Text 2 Flotation. Raising Finance

A company may finance its activities in a number of ways. It could simply obtain an overdraft from its bank. It could buy equipment on hire – purchase terms or lease it.

For borrowing of substantial sums and/or for long-term borrowing, it will often issue bonds (debentures-Br) at a fixed rate of interest; their attraction will depend on their tax advantages and a comparison of levels of income derivable from interest rate and dividends on shares.

Initial finance for most companies is provided by shares. The act of issuing shares (GB) or stocks (US) for the first time is known as floating a company (making a floatation). A company may issue shares by various methods: it could invite tenders or subscriptions directly from the public (usually through the agency of an investment bank (issuing house)). It might sell them to the investment bank, for it to resell them to the public, by issuing a prospectus or inviting subscriptions or it might place them with the investment bank, either for sale and resale to selected clients of the investment bank or for inviting clients to subscribe. The investment bank is rewarded by its profit on resale or by commission especially where it underwrites an issue. Any commission for underwriting an issue must not exceed 10 per cent.

There are 3 basic types of securities: common stock/ shares, preferred stock/shares, and bonds. Common stock is shares of ownership in a corporation. Preferred stock is shares of a corporation that usually do not confer voting rights but do give preference with respect to dividends and assets. Bonds are written promises that the borrower will pay the lender at some stated future date, a sum of money (principal) and the stated rate of interest. Before buying stocks and bonds, you must understand the pricing of stocks and bonds, which are reported, in many daily newspapers.

Assignment to text 3:

1. Read and translate the headline. What information do you expect to find in the text?

2. Read the text. Have you found anything beyond your expectations?

3. Make up an outline of the text supplementing every item with key words and word combinations.

4. Find the sentences which describe advantages of a corporation.

5. Taking advantage of the text give different definitions of a share.

6. Translate the text.

Дата добавления: 2015-11-16