A Private Limited company such as Norwich City Football Club does not sell shares on the stock exchange and shares can only be bought internally with the permission of the boards of directors.
The board of directors is a committee that is set up to protect shareholders interests. It is their job to appoint a managing director. The managing director has the job of the day to day running of the business.
The Normal Procedure for selecting a manager within a private limited company:-
By selling shares a private company will find it easier to raise money than a unlimited liability business. However, there is a down side to this. The private company has to share its profits around among its shareholders. It is also a much slower process when making decisions as they need to discuss their plans with the shareholders in the group.
The other types of businesses are :-
- Sole trader
- Partnership
- Public limited company
- Co-operative
- Not-for-profit or a charity
- Franchise
A sole trader has just the one owner. This does not however mean that there is just the one person working for the company. The owner may also employ people. E.g. somebody may have a gardening business, but they would still employ people to help with the tasks. E.g. different clients would want work doing at the same time.
A partnership tends to have between 2 and 20 partners. This is a better type of ownership when it comes to raising capital and the workload can be shared amongst the owners. The owners are likely to share a variety of skills. When a sole trader falls ill or goes on holiday the business may close down for a brief period of time, or, it may be difficult to run the business without the owner.
In my opinion it would be better for Norwich City FC if it were a PLC. This would mean that the public could put money into the company by buying shares. A typical share would have a face value of £1. From selling the shares the company would raise a lot more capital. However the profits would have to be shared out amongst all of the shareholders.
Manchester United FC use this effectively. Their shares are floated on the stock market. However, this does not necessarily mean that it would work for Norwich City. MUFC is a much larger company. They have a world wide franchise stretching to ASIA and the USA, whereas Norwich City is very much local based. MUFC are linked to nearly every product. There are MUFC cameras, mobile phones, drinks etc. These products are bought all around the world. Norwich City’s products are limited to their club shop and small local outlets.
Shareholders in companies have the legal protection of limited liability. Limited liability means that if the business goes bankrupt because it is unable to meet its debts, the owners/shareholders will not be liable to lose their possessions in order to pay the money that is owed. The most amount of money they would lose would be the amount they have to put into their shares. Small businesses with just a few shareholders will often be formed into private companies so they can get limited liability.
Limited liability becomes essential when a business expands to become very large. This is because it will be asking a lot of shareholders to risk their money in the business. Without limited liability status, many people will not be prepared to risk their money.
