Question

u be listed at the stock exchange in Manama. ohamad also realizes that at age 64, his days as active head of the company are numbered. With the challenges ahead, he would like to hire a team of managers with the international experience necessary to implement hi corporate vision QUESTIONS s 1. Discuss the consequences of the proposed change n. from a partnership to a corporation in terms of advantages and disadvantages. ds2. Describe potential agency conflicts that can arise ely when hiring a management team and suggest possible solutions. 3. Determine the amount of cash the company would is generate from going public. Does it matter to the company whether the share price rises subsequent ing to the IPO? Who benefits from an increase in the 20 company's share price? on), The 4. Do you see a tradeoff between a company's focus bu o n share price maximization and the adherence to e social and ethical standards? chi واحبابهايه

Answer 1

Hello! As I can only see the questions and not the background case study, I will answer the question in general sense. Also, as per answering guidelines, I will answer first question. Please ask each question separately!

Answer 1: Advantages of converting from Partnership firm to Company are as follows:

1. The liability of the shareholders is limited to the amount invested in purchasing the shares, in case of limited liability company. Whereas in partnership, the liability of the patners is unlimited.
2. The shareholders can increase the number of shares issued, and hence can invite the public to invest in the company. Through this, the company can have investment in the company, without incurring any debt.
3. With corporate structure, the governance of the company also becomes professional and streamlined. The roles and responsibilities in a company are more properly defined, then in a partnership firm.

The disadvantages of a company over a partnership are:

1. Firstly, as the shareholders increase, the control of the promoters also dillutes in the company. Whereas in a partnership, the partners are the sole decision makers in the firm.
2. There are many additional rules and regulations to be followed in a corporate structure, to adhere to the norms of the company oversight regulator and taxation authorities. This increases the time and money requirded to adhere to these.
3. As the money of the general public gets invested inb the company, the penalties for frauds and errors are more stringent and serious as compared to in a partnership firm, where the money involved is only of the partners.