Page 26 - Business_Studies_F5

Student's Book Form Five

Company who agree to pay a nominal amount of
A company is a corporate association debts or liabilities in the event of winding
of persons formed to carry out specific up. The profit earned by the companies is
functions to generate profit. It is a ‘corporate re-invested in the company to be used for
body’ created under the law and it exists different purposes. For example, most of
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on its own, separate from the members the non-profit making companies operate
who comprise it. In the eyes of the law, as companies limited by guarantee such
a company is an artificial person that can as TPSF.
enter into contracts, own properties, incur Unlimited companies: These are companies
liabilities, sue others, be sued by others, and without limits on their members’ assets.
do anything for which it has been formed In these companies’ shareholders become
for. Examples of companies in Tanzania liable for all the debts of the company
are Tanzania Commercial Bank (TCB), in case the company becomes insolvent.
the People’s Bank of Zanzibar (PBZ), If the company does not have sufficient
Air Tanzania Company Limited (ATCL), assets to pay all the liabilities during its
and Tanzania Electric Supply Company winding up, the personal belongings of
Limited (TANESCO). shareholders will be used to compensate

for the deficit.
Types of companies
Companies are classified based on the Classification of companies based on
nature of capital, ownership, control or ownership
holding, access to capital, and other factors The classification of companies based on
as follows: ownership is as follows:

Classification of companies based on Private companies: These are those
the nature of capital companies whose articles of association

Based on the nature of capital, companies restrict the free transferability of shares. In
are classified as follows: terms of members, private companies need
to have a minimum of two and a maximum
Companies limited by shares: In these kinds of fifty members.
of companies, the liabilities of members are
limited to the extent of the number of fully Public limited companies: These companies
paid-up shares. This means that in case of allow their members to freely transfer
winding up, members will be liable only their shares to others. They need to have
for the number and value of shares that a minimum of seven members, but they
have been fully paid for. have unlimited maximum number of
members. Most large-scale industrial and
Companies limited by guarantee: These commercial companies fall under this type
are companies without any shareholder but of company.
are owned by members called guarantors

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