Summary

Image

Learning Objectives: the students will be able to see the whole picture of the topic.

There are three different types of business organizations: sole-trader, partnership and limited companies.
Below it will explain more about limited companies.

Two types of limited companies

Private limited company have limited members as of family and friends, cannot sell shares to the public and do not need to publish reports and prospectus to the public.

Public Limited Company has unlimited capital due to its ability to sell its shares to the public. Prospectus and financial reports are required by companies act to be published and make available to the public.

Advertisements

Private Company (Sendirian Berhad or Sdn Bhd.)

Standard

Learning Objective: Student will be able to have an idea of what is a Private Company and their characteristics.

Companies that are incorporated in Brunei Darussalam are governed by the Companies Act (Cap 39). Under the Act, four types of companies may be incorporated:
• Companies limited by shares
• Companies limited by guarantee
• Companies limited both by shares and guarantee
• Unlimited companies.

The companies so incorporated may be either private or public companies. A private company must, by its constitution (Articles of Association), restrict the right of members to transfer shares, limit its membership to fifty and prohibit any invitation to the public to subscribe for shares or debentures.
• A public company is one which may issue freely transferable shares to the public and is not bound by any of the above restrictions relating to a private company.
• At least half the directors in a company must be Brunei citizens or Brunei Permanent Residents.
• Public companies must have at least seven shareholders. Private companies must have at least two shareholders. Shareholders need not be Brunei Darussalam citizens or residents, and a subsidiary company may hold shares in its parent company.
• All companies must appoint auditors to audit their accounts and report to the shareholders. The companies must also file annual returns with the Registrar of Companies and submit annual tax returns to the Collector of Income Tax ( CIT ) at the Ministry of Finance.

Summary:
• May be limited by shares, guarantee or both or unlimited
• Must have at least two and not more than fifty shareholders
• Shareholders need not be Brunei citizens or residents
• Restrict the right of members to transfer shares and prohibit any invitations to the public to subscribe for shares and debentures
• A subsidiary company may hold shares in its parent companies
• Memorandum and Articles of Association must be filled with the Registrar of Companies and Business Names with other incorporation documents in the prescribed form
• Upon approval, a Certificate of corporation will be issued and a fee of B$25.00 is imposed
• The registration fees are based on a graduated scale on the authorised share capital of the company
• No minimum share capital is required
• Private companies are required to do the following:

a. Appoint auditors who are registered in Brunei Darussalam
b. Prepare profit and loss account and balance sheet, accompanied by the Director’s Report annually
c. Submit accounting data annually to the Economic Planning Unit, Ministry of Finance
d. File annual returns, containing information on directors and shareholders
e. Keep the following records:

i. Minute Book of Members’ Meetings
ii. Minute Book of Directors’ Meetings
iii. Minute Book of Managers’ Meetings
iv. Register of Members
v. Register of Directors and Managers
vi. Register of Charges
• Subject to 23.5% gross profit corporate tax

Please refer to link below for original source:
http://www.bedb.com.bn/doing_guides_business_private.html

Public Company (Berhad or Bhd)

Standard

Learning Objectives: The Student will be able to identify and explain about Public Company and their characteristics

Features:
• May be limited or unlimited
• May issue freely transferable shares to the public
• Must have at least seven shareholders
• Shareholders need to be Brunei citizens or residents
• Subsidiary company may hold shares in its parent companies
• Half the directors in a company must be either Brunei citizens or ordinary residents in Brunei Darussalam
• Memorandum and Articles of Association must be registered with other incorporation documents in prescribed forms
• Upon approval, Registration of Companies Certificates will be issued and a fee of B$25.00 is imposed
• The registration fees are based on a graduated scale on the authorised share capital of the company
• No minimum share capital is required
• Public companies are required to do the following:

i. Appoint auditors who are registered in Brunei Darussalam
ii. Prepare each year profit and loss account and balance sheet, accompanies by a Director’s Report
iii. Submit accounting data annually to the Economic Planning Unit, Ministry of Finance
iv. File annual returns, containing information on directors and shareholders with the Registrar of Companies and Business Names
v. Keep the following records:

• Minute Book of Members’ Meeting
• Minute Book of Directors’ Meeting
• Minute Book of Managers’ Meeting
• Register of Members
• Register of Directors and Managers
• Register of Charges

Please refer to the link below for original source:
http://www.bedb.com.bn/doing_guides_business_public.html

Link

Learning Objectives: The students will be able to identify and differentiate the types of Business Organizations

According to The Brunei Economic Development Board (BEDB), the following are the definitions and characteristics of the different types of business organizations that entrepreneurs need to know in establishing a commercial trade in Brunei Darussalam:

Sole Proprietorship:

Singularly and privately-owned company liable for it’s own business obligation. Not Open to foreigners and not obliged to pay any corporate tax.

Partnership:

May consist up to 20 individuals, local or branches of foreign companies. In general requires 1 local partner (Bruneian or Brunei Permanent Residence). The partnership is open to foreigners to register and upon the approval of the Brunei Government. Furthermore, not obliged to pay any corporate tax.

Private Company (Sendirian Berhad / Sdn. Bhd / Pvt. Ltd):

Companies incorporated in Brunei Darussalam governed by the Companies Act (Cap 39). It is open for foreigners to register and it is subject to 22% corporate tax taken from the company’s Gross Profit.

Public Limited Company ( BERHAD / Bhd / Plc):

Companies that can transfer shares freely to public and it is open for foreigners to register. Like Private Company, Public Limited Company is also subject to 22% corporate tax that is taken from the company’s Gross Profit.

Branch of Foreign Company:

Any foreign company wishing to establish a presence in Brunei but not incorporated as local company. It is open for foreigner;s to register and it is subject to 22% corporate tax taken from the company’s Gross Profit.

Joint Venture:

A joint venture in the form of an incorporation or partnership between foreign & local company. It is open to foreigners to register and upon the approval of the Brunei Government. This type of business is obliged to pay 22% tax based on their gross profit.

Types of Share of Limited Companies

Standard

Learning Objective: Students will be able to know and differentiate types of shares available in limited companies.

A company under the memorandum of association has to register the maximum number of share they can raise through the public offer. The registered capital is also known as the authorized capital or nominal capital. The company must declare the types of shares offered to the public.

Preference Shares
Preference Shareholders get a fixed dividend for their investment, irregardless of the amount of profit earned. If the business fails, they have first claim in the distribution of the company’s assets. However, they have no voting rights and control in the operation of the business.

Ordinary Shares
Ordinary shareholders will get dividend at the rate declared by the company directors. They will receive their dividend only after the preference shareholders. However, they have voting rights and control in the operation of the business. If the business fails, they are last in the claim of the distribution of the company’s assets.

Deferred Shares
These deferred shares are usually held by the directors of the company. They do not have any voting rights and control over the management of the business. If the business fails, the shareholders can claim their investment after the preference shareholders are paid, but before the ordinary shareholders.

Source: Seng, L.T (2009), Basic Commerce Year 8, Star Publishing Pte Ltd, Singapore.

Here are some questions that you need to answer which can help you understand the topic further. Please write your answer in the comment box and we will discuss your answers in the class. Good Luck! 😀

Exercise on the types of shares of Limited Companies

  1. State 3 different types of shares.
  2. Identify 3 features of preference shares
  3. Identify 3 features of ordinary shares
  4. Identify 3 features of deferred shares

 

The advantages and disadvantages of Limited Companies.

Standard

Learning Objectives: Students will be identify and discuss the advantages and disadvantages of forming a limited company

The advantages of limited companies are shown below:

1. Available source of capital:
For a public listed company, it can raise a large amount of capital through public share issues. It is also fairly easy to raise funds through bank loans.

2. Expansion of business:
With a large capital, it is to expand its operation. It has a greater purchasing power and enjoys economies of scale,that is, greater discounts on bulk purchasing of goods or services.

3. Continuity
The company is a separate entity from its shareholders and it can be a more permanent existence. The ability of the owners to transfer their shares allows greater continuity for the company.

4. Limited Liability
As limited liability shareholders, there is a limited risk for the investors. If the company fails, they stand to lose only what they have invested in the shares. This limited liability allows company to raise more capital through investors.

5. Transfer of ownership
Ownership rights can be transferred easily through the stock exchange, especially in the case of a listed public limited company. This makes it very attractive as the investors can get their money back easily.

Disadvantages of Limited Companies

The disadvantages of limited companies are shown below:

1. More restrictions
More restrictions and controls are placed on the company’s formation and its operation. There is greater concern on its code of governance and the keeping of proper accounting records. Accounting records are also subjected to auditing and all these involve more expenses for the company.

2. Lack of incentive and commitment
The salaries workers are employees of the public limited company. Likewise, shareholders are investors and have no direct personal interest and incentive to work for the success of the business.

3. Tax liability
The tax burden for the company is heavier corporate tax (22% of gross profit) compare to the sole proprietor and the partnership. (Refer to BEDB – Brunei Economic Development Board website for more information on corporate tax)

source: Seng, L.T (2009), Basic Commerce Year 8, Star Publishing Pte Ltd, Singapore.

Here are some questions that you need to answer which can help you understand the topic further. Please write your answer in the comment box and we will discuss your answers in the class.

Good Luck! 😀

Exercise on the advantages of Limited Companies.

Explain 5 of the advantages of Limited Companies in your own words.

Exercise on the disadvantages of Limited Companies.

Explain 3 of the disadvantages of Limited Companies in your own words.

Common Features of Private and Public Limited Companies

Standard

Learning Objectives: The student will be able to discuss and explain some similarites between private and public limited companies.

The common features of private and public limited companies are shown below:
1. Both types of companies are registered with the words “Ltd” / “Sdn Bhd” under the Companies Act.
2. The shareholders and the company are separate entities.
3. All shareholders have limited liability.
4. A board of directors is elected by the shareholders. The ultimate control of the business lies with the shareholders. They can replace the directors by voting during the annual general meeting.
5. Salaries managers are employed to manage the business. Shareholders do not manage the business, especially in the public limited companies.
6. The profits earned at the end of the year are subjected to corporate taxes.

Source: Seng, L.T, 2009, Basic Commerce, Star Publishing Pte Ltd, Singapore.

Here are some questions that you need to answer which can help you understand the topic further. Please write your answer in the comment box and we will discuss your answers in the class. Good Luck! 😀

Exercise on Common features of Limited Companies.

  1. State 3 common features of Limited Companies.
  2. How can the directors of a Limited Company be replaced and when can they be replaced?
  3. How much corporate tax should both Limited Companies pay?