WAEC Economics 2022 Theory — Question 3

Model answer

(a) Limited liability exists where the financial obligations of a firm's owners, in case it fails, is limited to the amount of capital invested in the enterprise. (b) Differences between a public joint-stock company and a private joint-stock company: (i) Ownership: A private joint-stock company is made up of between 2 and 50 members while a public joint-stock company is made up of between 7 and infinity (unlimited members). (ii) Finance: The private company raises shares privately while the public company raises capital through the stock market. (OR: Shares for the private company are not quoted on the Stock Exchange but public companies have their shares on the Stock Exchange.) (iii) Publishing of accounts: Private companies are not mandated to publish their annual accounts, but public companies are compelled by law to publish their accounts. (iv) List of directors: Private companies are not under obligation to submit the list of directors to the Registrar of Companies, but public ones are requested by law to do so. (v) Transfer of shares/ownership: Members of private companies cannot easily transfer shares, but shareholders of public companies can easily do so through the stock market. (vi) Public companies can raise capital by issuing debentures, while private companies cannot. (vii) In public companies ownership is separated from management, while in private companies ownership may not be separated from management. (viii) The name of a public company must end with 'Plc' and that of a private company 'ltd'.