33 Choosing the right legal structure

Center Parks (UK) is a business that specialises in providing short break holidays. It opened it's first PARK in holland in 1967 and moved to the UK in 1987 and opened the SHERWOOD FOREST site.  Click here to have a look.

Starter - Getting to know the knowledge in Context

It costs about £160m to build a holiday village with all the challets in the wooded forest and the domed swimming pool center in the middle.  They lease the land.  The company was owned by Scottish and Newcastle until 2001 to allow them to concentrate on BREWING.  Mid Ocean sold the business in 2003 to a company called Arbor.  Center Parks was then floated on the London Stock Exchange's Alternative Investment Market (AIM).  This means that Center Parks was allowed to sell shares to the public without having to OBEY many of the regulations the STOCK EXCHANGE imposes. In 2005 it became a FULL PLC in 2005.  

As a PLC Center Parks does not have to limit its shareholders to those directly connected with the business as it could now sell shares directly to the public on the stock exchange. The reward for holding on to the shares is called a DIVIDEND.   In 2006 the business was sold to the BLACKSTONE GROUP .  The business was brought back into a PRIVATE LTD COMPAY with the support of its large parent company. It cannot now sell shares to people outside the organisation.

PLC's can raise large amounts of money or CAPITAL more easily on the stock market whereas PRIVATE LTD'S Co's cannot.  There are disadvantages in becoming a plc and sometimes businesses return to being private limited companies..

NB Don't confuse PUBLIC LIMITED COMPANY with PUBLIC SECTOR.  Which is owned by the SHAREHOLDERS and which is owned by the GOVERNMENT?

Q. Do the SHAREHOLDERS of a PLC company have the same interests as the OWNERS of a Private LTD Co.?

Activity
The class is to split into four teams of six.  Two teams will specialise on public limited companies and their advantages advantages and disadvantages and two will specialise on private limited companies and their advantages and disadvantages. The eseach will be put to the test as a vebal boxing tournement.  

Web based activity: 
Each team has £100,000 to invest in PLC's  No team can invest in more than 5 companies, you can sell or buy shares once a week and the competition ends on the 30th May 2012

Discussion
Discuss ways in which Center Parks might encourage business users to use its facilities

Quick Quiz

1. What type of holiday's do Center Parks provide?
2. Who does Center Parks target as its customers?
3. What is the cost of building a new Center Parks village?
4. What company currently owns Center Parks?
5. What is an AGM?
6. Give one difference between private and public limited companies
7. What could a shareholder do if they thought that the company was not making enough profit?
8. What is meant by a public ltd company?
9. Explain an advantage of a business becoming a PLC
10. IS going public the best way for a business to raise large amounts of capital?

Worksheets

public limited companies

Extension exercise - 9 mark exam question

Alex Hill is the chief executive of Zantos plc, a sports clothing business that started off in the UK
and then expanded abroad.  It is now well known in many countries in Europe and has a high market share.  The company produces a wide range of sports clothing.  These are made mainly in Asia, where the labour costs are much lower.  Zantos also uses suppliers based in Asia.  Yesterday a newspaper ran a story showing that one of Zantos suppliers was enploying children aged 14 years who were working 60 hours a week for a wage of just £40 a month.  Zantos are being accused of being unethical in its approach because it uses this type of supplier.  The phones have not stopped ringing since the story was released and Alex is working out how to deal with it.

1. Explain why a business should always aim to be ethical (9marks)