Stocks and shares

Companies.

Individuals, and groups of people business as a partnership, have unlimited liability for debts, unless they form a limited company. If the business does badly and cannot pay its debts, any creditor can have it declared bankrupt. The unsuccessful business people may have to sell nearly all their possessions in order to pay their debts. This is why most people doing business form limited companies. A limited company is a legal entity separate from its owners, and is only liable for the amount of capital that has been invested in it. If a limited company goes bankrupt, it is wound up and its assets are liquidated (i.e. sold) to pay the debts. If the assets don’t cover the liabilities or the debts, they remain unpaid. The creditors simply do not get all their money back.

Most companies begin as private limited companies. Their owners have to put the capital themselves, or borrow from friends or a bank, perhaps a bank specializing in venture capital. The founders have to write a Memorandum of Association ( GB) or a Certificate of Incorporation (US), which states the company’s name, its purpose, its registered office or premises, and the amount of authorized share capital. They also write Articles of Association (GB) or Bylaws (US), which set out the duties or directories and the rights of shareholders (GB) or stockholders (US). They send these documents to the registrar of companies.

A successful, growing company can apply to stock exchange to become a public limited company (GB) or a listed company (US). Newer and smallest usually join “over-the-counter” markets such as the Unlisted Securities Market in London or NASDAQ in New York. Very successful businesses can apply to be quoted or listed (i.e. to have their shares traded) on major stock exchanges. Publicly quoted companies have to fulfill a large number of requirements, including sending their shareholders an independently-audited report every year, containing the year’s trading results and a statement of their financial position.

The act of issuing shares (GB) or stocks (US) for the first time is known as floating a company ( making flotation). Companies generally use an investment bank to underwrite the issue, i.e. to guarantee to purchase all the securities at an agreed price on a certain day, if they cannot be sold to the public.

Companies wishing to raise more money for expansion can sometimes issue new share, which are normally offered first to existing shareholders at less than their market price. This is known as a rights issue. Companies sometimes also choose to capitalize part of their profit, i.e. turn it into capital, by issuing new shares to shareholders instead of paying dividends. This is known as bonus issue.

Buying a share gives its holder part of the ownership of a company. Shares generally entitle their owners to vote at a company’s Annual General Meeting (GB) or Annual Meeting of Stockholders (US), and to receive a proportion of distributed profits in a form of a dividend- or to receive part of the company’s residual value if it goes into liquidation. Shareholders can sell their shares on the secondary market at any time, but the market price of a share- the price quoted at any given time on the stock exchange, which reflects (more or less) how well or badly the company is doing- may differ radically from its nominal value.

Alternative terminology.
Americans often talk about corporations rather than companies and about an initial public offering rather than a flotation.
Another name for stocks and shares is equities, because all the stocks or shares of a company – or at least all those of a particular category – have equal value.
Two other terms for nominal value are face value and par value.
Other names for a bonus issue are a scrip issue(short for ‘subscription certificate’) and a capitalization issue, and in the US, a stock dividend or stock split.


Translation.
Компании.
Физические лица и группы людей, занимающихся бизнесом в форме партнерства, имеют неограниченные обязательства по долгам, в случае если они не формируют общество с ограниченной ответственностью. Если дела идут плохо и компания не может рассчитаться по долгам, любой кредитор может объявить её банкротом. Неуспешным бизнесменам может понадобиться продать почти всё имущество, чтобы выплатить долги. Это является причиной того, что большинство людей, занимающихся бизнесом, образуют общество с ограниченной ответственностью. Общество с ограниченной ответственностью - это юридическое лицо, отдельное от своих владельцев, и ответственное только за капитал, который был в него инвестирован. Если общество с ограниченной ответственностью становится банкротом, оно ликвидируется , и его активы продаются, чтобы погасить задолженности. Если активы не покрывают обязательства или долги, они остаются непогашенными. Кредиторам просто не возвращают полностью все их деньги.

Большинство компаний начинают как частные компании с ограниченной ответственностью.
Их владельцы должны самостоятельно создавать капитал или брать в долг у друзей или банка, возможно у банка, который специализируется на рисковом капитале. учредители должны составить Учредительный Договор, в котором указывается название компании, ее цель, ее зарегистрированный офис или здание, и количество уставного капитала. Они также составляют Устав корпорации, который устанавливает обязанности директоров и права акционеров. Они отправляют эти документы в регистратор компаний.

Успешная растущая компания может выставиться на фондовой бирже, чтобы стать открытым акционерным обществом. Новые и небольшие компании обычно присоединяются к «рынку ценных бумаг, продающихся по телефону или через компьютерную сеть», такие как Частный Рынок Ценных Бумаг в Лондоне или Nasdaq в Нью-Йорке. Очень успешные компании могут котироваться( то есть продавать свои акции) на крупнейших фондовых биржах.
Публично котируемые компании должны выполнить широкий ряд предписаний, включая ежегодное осведомление своих акционеров путём независимо-ревизованного отчёта, в котором отражаются результаты торговли и справка об их финансовом положении. Процесс выпуска облигаций или акций впервые носит название учреждения компании (создание учреждения). В большинстве случаев компании прибегают к помощи инвестиционных банков для подписания доходов, то есть гарантировать покупку всех ценных бумаг по установленной цене в определённый момент в том случае, если они не будут проданы общественности.
Компании желающие привлечь больше денежных средств путём экспансии могут выпустить новые акции, которые ,как правило, сначала предлагаются нынешним акционерам по цене ниже рыночной. Этот процесс называется выпуск новых акций. Также компании выбирают капитализацию части прибыли, путём выпуска новых акций взамен оплаты дивидендов. Это называется премиальный выпуск акций.
Покупая акцию, обладатель получает часть владения компанией. Акции, в целом, наделяют правом их обладателей голосовать на Ежегодном Всеобщем Собрании или на Ежегодной Встрече Акционеров, получить часть распределённой прибыли фирмы в виде дивидендов – или получить часть ликвидационной стоимости компании в случае её роспуска. Акционеры в праве продать свою долю на второстепенных рынках, но рыночная стоимость акции – стоимость, котируемая на фондовом рынке, отражает (в большей или меньшей степени) насколько успешна компания на данный момент – может радикально отличаться от её номинальной стоимости.


1c comprehension

Write questions that could produce the following answers.
1 They have to and their shareholders report the end of every financial year, including independently audited financial statements, and hold annual general meeting.
2 A market for young or small companies which do not want to have their shares traded on a major stock exchanges.
3 It issues new shares offering them to existing shareholders first.
4 It’s when a company chooses to issue new shares to existing shareholders rather than pay them a dividend.
5 They are generally entitled to write a companies’ General Meetings and to receive a dividend if the company makes a profit.

1d Vocabulary
Find words in the text which mean the following:
1 having responsibility or an obligation to do something, e.g. to pay a debt
2 a person or organization to whom money is owed ( for goods and services rendered or as repayment of a loan)
3 to be insolvent : unable to pay debts
4 everything of value owned by a business that can be used to produce goods, pay liabilities, and so on
5 to sell all the possessions of a bankrupt business
6 to provide money for a company or other project
7 money invested in a possibly risky new business
8 the people who begin a new company
9 the place in which a company does business: an office, shop, workshop, factory, warehouse and so on
10 to guarantee to buy an entire new share issue, if no one else wants it
11 a proportion of the annual profits of a limited company, pay to shareholders.

2c
Match the following words and definitions.

mutual fund; market maker; defensive stock; stockbroker; portfolio; insider share-dealing; growth stock; institutional investor; blue chip.

1 A company that spreads investors’ capital over a variety of securities
2 An investor’s selection of securities
3 A person who can advise investors and buy and sell shares for them
4 A stock in a large company or corporationthat is considered to be a secure investment
5 A stock – in an industry not much affected by cyclical trends – that offers a good return but only a limited chance to rise or decline in price
6 A stock – which usually has a high purchasing price and a low current rate of return – that is expected to appreciate in capital value
7 A wholesaler in stocks and shares who deals with brokers
8 Financial organizations such as pension funds and insurance companies which own most of the shares of all leading companies(over 60% and rising)
9 The use of information not known to the public to make a profit out of buying and selling shares



2d. There is a logical connection among three of the four words in each of the following groups. Which is the odd one out, and why?

1. Annual report- external auditors- financial statements- stockbroker
2. Blue chip- defensive stock- growth stock- rights issue
3. Bonus issue- dividend- over-the-counter - shareholder
4. Debt- equity- share- stock
5. Face value- market value- nominal value – par value
6. Float – liquidation- share issue- underwriter
7. Institutional investor- insurance company – liabilities- pension fund
8. Mutual fund – portfolio- risk – underwriter

Case study.
Imagine that a relative, who knows very little about finance, asks you to invest $10.000 for her in a portfolio of investments, but insists that she only wants her money invested in ‘wholly ethical companies’.
Which of the following activities would cause you to rule out a company as a possible investment?
-emitting a large quantity of CO2 into the atmosphere;
-factory farming;
-making donations to political parties;
-manufacturing weapons;
-marketing powdered baby milk in countries without pure water supplies;
-not recognizing trade unions;
-obliging retail staff to work on Sundays;
-paying low wage levels in developing countries;
-producing nuclear energy;
-selling alcohol;
-selling tobacco;
-relocating production to countries with lower labour costs;
-testing cosmetic products on animals;
-trading with oppressive regimes.

Keys:
1d
1. liability
2. creditor
3. to go bankrupt
4. assets
5. to liquidate
6. to put up the capital
7. venture capital
8. founders
9. premises
10. to underwrite the issue
11. dividend

2c
1 mutual fund
2 portfolio
3 market maker
4 defensive stock
5 blue chip
6 growth stock
7 stockbroker
8 institutional investor
9 insider share-dealing

2d
1.Stockbroker
2.Rights issue
3.Over-the-counter
4.Debt
5.Market value
6.Liquidation
7.Liabilities
8.Underwriter