Question

Burt has come across an excellent recipe for a new beer, and he and 20 college friends decide to go into business. They form a corporation named New Brew Inc., issuing stock only to the 21 of them and not selling any stock outside the group. The beer is a huge success, and they soon need to expand. They decide to sell stock to members of the public to raise capital. What type of corporation is New Brew before the sale of stock to the public? Aside from stock disclosure requirements, what must they do, and how will it affect their corporate status?

Answer 1

Private Limited Company is being run by New Brew before the sale of stock to the public.

Aside from stock disclosure requirements, they must-

a).Holding of Extra Ordinary General Meeting: Hold the Extra-ordinary General meeting (EGM) on due date and pass the necessary Special Resolution,

b).To get shareholders' approval for Conversion of Private Company into a Public company along with alteration in articles of association.

It will affect their corporate status because-

a). Securities Excange Commission will require public companies to disclose financial and other information to their owners, so that investors can determine for themselves if their company's securities are a good investment.

b). a public company, that its authorized capital is at least the authorized minimum capital decided by law.

c). its name will end with plc (or public limited company).

Thanks & all the best...........