Question

(a) Compare and contrast public and private corporations.

            (b) What is Bankruptcy? Under what circumstances a corporation may be declared bankrupt?

C)What are the duties of the trustee in bankruptcy?

Please use your own words

Answer 1

Ans a ) The differences between the public and private corporations are as follows:

The Private corporations dont issue share to the public. The shares are held privately by the owners and the management. As per the name the public companies issue share to the public through IPO or initial public offer.The regulations of the public companies are more because here the sharehoders interest is to be protected by the  regulators of the share market ,like SEC in US . Public companies have access to a huge financial resources as they can raise funds through ,equity ,preference and bonds etc. The sources of finance of private company are limited to the owners funds or their capacity to borrow.

Ans b) Bankruptcy is the legal process , which is untertaken if the debtor is unable to pay the debt. The assets of the debtors are evaluated and are used to pay the debt. In US the bankruptcy is goverened by Federal law and is known as bankruptcy Code. The circumstances basis which a corporation is considered bankrupt are as follows :

Chapter 7 bankruptcy : Under it a company is not able to service its debt and fullfill its commitment towards the shareholders in such a kind of bankruptcy all the operations are stopped and a trustee is appointed to sell the company assets and pay the debt. Chapter 11 bankruptcy is concerened with the organisations which are findind difficult to manage debt and need some time. They have the potential to continue the operations. It gives fresh start to the company.

Ans c ) A trustee is a person appointed to liquidate the assets of the corporation which has filed for the bankruptcy and use the proceeds to pay the debt. The duty of the trustee are 1.Calculating debtors property .2) Selling the properties of the bankrupt party. 3) Has to evaluate the creditors claims 4) Distributing the proceeds to the creditors

5) Can analyse the debtors repayment plan and has a right to raise questions.