Theory question 103
Government and BusinessCommerce 2 (theory)
Differentiate between public enterprises and public companies under the following headings:
(i) formation;
(ii) ownership;
(iii) purpose;
(iv) management;
(v) sources of funds.
Show the model answer
(i) Formation: public enterprise – set up by an Act/decree of government (or by government decision); public company – formed by promoters registering a memorandum and articles of association with the Registrar (Corporate Affairs Commission).
(ii) Ownership: public enterprise – owned by government on behalf of the people; public company – owned by shareholders (minimum of 7, no maximum).
(iii) Purpose: public enterprise – mainly to provide essential services/welfare; public company – mainly to make profit for shareholders.
(iv) Management: public enterprise – board of directors/corporation board appointed by government (minister); public company – board of directors elected by shareholders at the AGM.
(v) Sources of funds: public enterprise – government grants and subsidies, loans, revenue from its services; public company – sale of shares and debentures to the public, retained profits, bank loans.
Set out each heading with the two contrasting statements side by side.