Sole proprietor, Partnership, Corporation

1. BUSINESS OWNERSHIP :
SOLE
PROPRIETOR, PARTNERSHIPS AND
CORPORATIONS
Stephen Ong, BSc(Hons) Econs
(LSE), MBA International Business(Bradford)
Visiting Fellow, Birmingham City University
Visiting Professor, Shenzhen University
MBA1034 GOVERNANCE, LAW & ETHICS

2. • Discussion: Auditor
Independence
1
• Sole
Proprietorship, Partners
hip, & Corporations
2
• Case Discussion :
Premier Oil3
Today’s Overview

3. 1. Open Discussion
• Rocco R. Vanasco, (1996),"Auditor
independence: an international
perspective", Managerial Auditing
Journal, Vol. 11 No.: 9 pp. 4- 48

4. Overview
• Introduction to business ownership
• Sole proprietorship
• Partnership
• Corporations
• Corporations and the Sarbanes-
Oxley Act
• Other Forms of ownership

5. 2.
FORMS
OF
BUSINESS
OWNERSHIP

6. Choosing a Form of Ownership
• There is no one “best” form of
ownership.
• The best form of ownership depends on
an entrepreneur’s particular situation.
• Key: Understanding the characteristics
of each form of ownership and how well
they match an entrepreneur’s business
and personal circumstances.

7. Factors Affecting the Choice
• Tax considerations
• Liability exposure
• Start-up and future capital
requirements
• Control
• Managerial ability
• Business goals
• Management succession plans
• Cost of formation

8. Major Forms of Ownership
• Sole Proprietorship
• Partnership
• Corporation
• S Corporation
• Limited Liability Company
• Joint Venture

9. 5 - 9
FIGURE 1 (A) Forms of
Business Ownership –
Percentage of Business

10. 5 - 10
FIGURE 1 (B)
Forms of Business
Ownership -
Percentage of Sales

11. FIGURE1 (C)
Forms of Business
Ownership -
Percentage of Profit

12. 2.1
SOLE
PROPRIETORSHIP

13. Entrepreneurship
• Entrepreneur: A person who forms and
operates a new business either by himself or
herself or with others
• Sole proprietorship: A form of business in
which the owner is actually the business
– The business is not a separate legal entity
– Sole proprietor: The owner of a sole
proprietorship
14-13

14. Creation of a Sole Proprietorship
• No federal or state government approval is
required
• D.b.a. (doing business as): A designation for a
business that is operating under a trade name
• Fictitious business name statement (certificate
of trade name)
– A document that is filed with the state that
designates:
• A trade name of a business
• The name and address of the applicant
• The address of the business

15. Advantages of the Sole
Proprietorship
• Simple to create
• Least costly form to begin
• Profit incentive
• Total decision making authority
• No special legal restrictions
• Easy to discontinue

16. 5 - 16
Disadvantages of the
Sole Proprietorship
• Unlimited personal liability
• Limited skills and capabilities
• Feelings of isolation
• Limited access to capital
• Lack of continuity of the
business

17. Liability Features of the
Basic Forms of Ownership
5 - 17
Sole Proprietorship
Claims of Sole Proprietor’s Creditors
Sole Proprietor’s
Personal Assets

18. Personal Liability of a Sole Proprietor
• Unlimited personal liability: The
personal liability of a sole proprietor for
the debts and obligations of a sole
proprietorship
• Taxation of a sole proprietorship
–A sole proprietorship does not pay taxes at
the business level
–A sole proprietor has to file tax returns and
pay taxes to state and federal governments

19. Exhibit 1 - Sole Proprietorship

20. 2.2
PARTNERSHIP

21. Partnership
• An association of two or more
people who co-own a business for
the purpose of making a profit.
• Always wise to create a partnership
agreement.
• The best partnerships are
built on trust and respect.

22. Advantages of the Partnership
• Easy to establish
• Complementary skills of partners
• Division of profits
• Larger pool of capital
• Ability to attract limited partners
5 - 22

23. Types of Partners
• General partners
–Take an active role in managing a business.
–Have unlimited liability for the partnership’s
debts.
–Every partnership must have at least one
general partner.
• Limited partners
–Cannot participate in the day-to-day
management of a company.
–Have limited liability for the partnership’s
debts.

24. Advantages of the Partnership
• Easy to establish
• Complementary skills of partners
• Division of profits
• Larger pool of capital
• Ability to attract limited partners
• Minimal government regulation
• Flexibility
• Taxation

25. Disadvantages of the
Partnership
• Unlimited liability of at least one
partner

26. Liability Features of the Basic
Forms of Ownership
5 - 26
Partnership
Claims of Partnership’s Creditors
Partnership’s
Assets
General
Partner’s
Personal
Assets
General
Partner’s
Personal
Assets

27. Disadvantages of the
Partnership
• Unlimited liability of at least one partner
• Capital accumulation
• Difficulty in disposing of partnership
interest without dissolving the
partnership
• Lack of continuity
• Potential for personality and authority
conflicts
• Partners bound by law of agency

28. Limited Partnership
• A partnership composed of at least
one general partner and one or more
limited partners.
• A general partner in this partnership
is treated exactly as in a general
partnership.
• A limited partner has limited
liability and is treated as an
investor in the business.

29. General Partnership
• An association of two or more persons to
carry on as co-owners of a business for
profit [UPA Section 6(1)]
–General partners (partners): Persons liable
for the debts and obligations of a general
partnership
• Uniform Partnership Act (UPA): A model
act that codifies partnership law
–Most states have adopted the UPA in whole
or in part

30. Formation of a General
Partnership
• To qualify as a general partnership
under the UPA a business must be
–An association of two or more
persons
–Carrying on a business
–As co-owners
–For profit

31. Exhibit 2 - General Partnership

32. Name of a General Partnership
• A general partnership must file a
fictitious business name statement
with the appropriate government
agency to operate under a trade
name
• General partnership agreement
–A written agreement that partners
sign to form a general partnership

33. Taxation of General Partnerships
• Flow-through taxation
–The income and losses of partnership flow
onto and have to be reported on the
individual partners’ personal income tax
returns
• Right to participate in management
–Each partner has a right to participate in the
management of a partnership and has an
equal vote on partnership matters
• Unless otherwise agreed

34. Right to Share in Profits
 The right to share in the earnings from the
investment of capital
 Unless otherwise agreed
 Right to an accounting
 Action for an accounting: A formal judicial
proceeding in which the court is authorised to
 Review the partnership and the partners’
transactions
 Award each partner his or her share of the
partnership assets

35. Tort Liability of General Partners
• Unlimited personal liability of a general
partner
– A general partner’s personal liability for the debts
and obligations of the general partnership
• Joint and several liability: Tort liability of
partners together and individually
– A plaintiff can sue one or more partners separately
– If successful, the plaintiff can recover the entire
amount of the judgment from any or all of the
defendant-partners who have been found liable

36. Contract Liability of General Partners
• General partners have unlimited personal
liability for contracts of the partnership
• Under the UPA
–General partners have joint liability for the
contracts and debts of the partnership
–Joint liability: Liability of partners for contracts
and debts of the partnership
• A plaintiff must name the partnership and all of the
partners as defendants in a lawsuit

37. Liability of Incoming General
Partners
• A new partner who is admitted to a
general partnership is
–Liable for the existing debts and
obligations of the partnership only to the
extent of his or her capital contribution
–Personally liable for debts and
obligations incurred by the general
partnership after becoming a partner

38. Dissolution of a General Partnership
• The change in the relationship of
partners in a partnership caused by any
partner ceasing to be associated in the
carrying on of the business [UPA Section
29]
• Winding up: Liquidating a partnership’s
assets and distributing the proceeds to
satisfy claims against the partnership

39. Wrongful Dissolution
• A situation in which a partner withdraws
from a partnership without having the right
to do so at that time
– The partner is liable for damages caused by the
wrongful dissolution of the partnership
• Upon dissolution the debts are satisfied in
the following order [UPA Section 40(b)]
• Creditors (except partners who are creditors)
• Creditor-partners
• Capital contributions
• Profits

40. Continuation of a General
Partnership After Dissolution
• The surviving, or
remaining, partners have the right
to continue a partnership after its
dissolution
–Continuation agreement – Expressly
sets forth:
• The events that allow for continuation of
the partnership
• The amount to be paid outgoing

41. Right of Survivorship
• A rule which provides that upon the death of a
general partner:
– The deceased partner’s right in specific partnership
property vests in the remaining partner or partners
• The value of the deceased general partner’s interest in
the partnership passes to his or her beneficiaries or heirs
• Liability of outgoing partners
– Personally liable for debts and obligations that exist
at the time of dissolution
– Not liable for any new debts and obligations incurred
after the dissolution

42. Exhibit 3 - Limited Partnership

43. Uniform Limited Partnership Act
• Contains a uniform set of provisions
for the formation, operation, and
dissolution of limited partnerships
• Revised Uniform Limited Partnership
Act (RULPA)
–Provides a more
modern, comprehensive law for the
formation, operation, and dissolution of
limited partnerships

44. Formation of a Limited Partnership
• Certificate of limited partnership: A document
that two or more persons must execute and
sign that makes a limited partnership legal and
binding
– Under RULPA, two or more persons must execute
and sign the certificate
– The certificate of limited partnership must be filed
with
• The secretary of state of the appropriate state
• The county recorder in the county or counties in which
the limited partnership carries on business, if required
by state law

45. Defective Formation
• Incorrect creation of a limited
partnership that occurs when:
–A certificate of limited partnership is not
properly filed
–There are defects in a certificate that is
filed
–Some other statutory requirement for the
creation of a limited partnership is not
met

46. Limited Partnership Agreement
• A document that sets forth:
–The rights and duties of
general and limited partners
–The terms and conditions
regarding the
operation, termination, and
dissolution of a

47. Liability of General and Limited
Partners
• Unlimited liability of general partners
– The unlimited personal liability of general partners
of a limited partnership for the debts and
obligations of the general partnership
• Limited liability of limited partners
– The limited liability of limited partners of a limited
partnership only up to their capital contributions to
the limited partnership
– Limited partners are not personally liable for the
debts and obligations of the limited partnership

48. Personal Guarantee
• A creditor may require a limited partner to
personally guarantee the repayment of a
loan in order to extend credit to the limited
partnership
–If the limited partnership defaults on the loan:
• The creditor may enforce the personal guarantee
and recover payment from the limited partner who
personally guaranteed the repayment of the loan

49. Management of a Limited
Partnership
• Under the RULPA
– A limited partner is liable as a general partner if his
or her participation in the control of the business is
substantially the same as that of a general partner
– The limited partner is liable only to persons who
reasonably believed him or her to be a general
partner
– New Section 303 of the RULPA permits limited
partners to participate in the management of a
limited partnership without losing their limited
liability shield

50. Dissolution of a Limited Partnership
• A certificate of cancellation must be filed by the
limited partnership with the secretary of state of
the state in which the limited partnership is
organized
• Distribution of assets of a limited partnership
– Creditors of the limited partnership, including partners
who are creditors (except for liabilities for distributions)
– Partners with respect to:
• Unpaid distributions
• Capital contributions
• The remainder of the proceeds

51. 2.3
CORPORATION

52. Corporation
• A separate legal entity from its owners.
• Types of corporations:
–Domestic – a corporation doing business in
the state in which it is incorporated.
–Foreign – a corporation doing business in a
state other than the state in which it is
incorporated.
–Alien – a corporation formed in another
country but doing business in the United
States.

53. Corporation
Types of corporations:
• Publicly held – a corporation that has a
large number of shareholders and
whose stock usually is traded on one of
the large stock exchanges.
• Closely held – a corporation in which
shares are controlled by a relatively
small number of people, often family
members, relatives, or friends.

54. Advantages of the Corporation
• Limited liability of stockholders

55. Liability Features of the Basic
Forms of Ownership
5 - 55
Corporation
Claims of Corporation’s Creditors
Corporation’s
Assets
Shareholder’s
Personal Assets
Shareholder’s
Personal Assets

56. Advantages of the Corporation
• Limited liability of stockholders
• Ability to attract capital
• Ability to continue indefinitely
• Transferable ownership

57. Disadvantages of the
Corporation
• Cost and time of incorporation process
• Double taxation
• Potential for diminished managerial
incentives
• Legal requirements and regulatory “red
tape”
• Potential loss of control by founder(s)

58. S Corporation
• No different from any other corporation
from a legal perspective.
• An S corporation is taxed like a
partnership, passing all of its profits (or
losses) through to individual
shareholders.
• To elect “S” status, all shareholders must
consent, and the corporation must file
with the IRS within the first 75 days of its
tax year.

59. Liability Features of the Basic
Forms of Ownership
5 - 59
S-Corporation
Claims of S-Corporation’s Creditors
S-Corporation’s
Assets
Shareholder’s
Personal Assets
Shareholder’s
Personal Assets

60. Limited Liability Company (LLC)
• Resembles an S Corporation but is
not subject to the same
restrictions.
• Two documents required:
–Articles of organization
–Operating agreement

61. Limited Liability Company (LLC)
An LLC cannot have more than two
of these four corporate
characteristics:
1. Limited liability
2. Continuity of life
3. Free transferability of interest
4. Centralized management

62. Limited Liability Company (LLC)
• An unincorporated business
– Combines the most favorable attributes of
general partnerships, limited partnerships, and
corporations
• An LLC is a separate legal entity (or legal
person) distinct from its members
• Member: An owner of an LLC
– Some states refer to members as shareholders

63. Uniform Limited Liability Company
Act (ULLCA)
• A model act that provides comprehensive
and uniform laws for the
formation, operation, and dissolution of LLCs
• Revised Uniform Limited Liability Company
Act (RULLCA): A revision of the ULLCA
– Provides comprehensive and uniform laws for
the formation, operation, and dissolution of LLCs

64. Taxation of LLCs
• An LLC’s income or losses flow through to the
members’ individual income tax returns
– This avoids double taxation
• Formation of an LLC
– An LLC may be organized by one or more persons
– It can be organized in only one state
– The name of the LLC must contain the words
limited liability company or limited company or
the abbreviation L.L.C., LLC, L.C., or LC.

65. Articles of Organization
• The formal documents that must be
filed at the secretary of state’s office
of the state of organization of an LLC
in order to form the LLC
–The LLC is a domestic LLC in the state
in which it is organized
–The LLC foreign LLC in any state in
which it wants to conduct business

66. Operating Agreement
• An agreement entered into among
members that governs the affairs and
business of the LLC and the relationships
among members, managers, and the LLC
–Certificate of interest: A document that
evidences a member’s ownership interest in
an LLC
–The ULLCA mandates that a member has the
right to an equal share in the LLC’s profits
• Unless otherwise agreed

67. Distributional Interest
• A member’s ownership interest in an LLC
– Entitles the member to receive distributions of
money and property from the LLC
• Liability LLC members
– The liability of LLC members for the LLC’s
debts, obligations, and liabilities, which is limited
to the extent of their capital contributions
– Members of LLCs are not personally liable for
the LLC’s debts, obligations, and liabilities

68. Liability Features of the Basic
Forms of Ownership
5 - 68
Limited Liability Company - LLC
Claims of LLC’s Creditors
LLC’s
Assets
Member’s
Personal Assets
Member’s
Personal Assets

69. Exhibit 4 - Limited Liability
Company (LLC)

70. Liability of Managers
• Managers of LLCs are not personally liable for
the debts, obligations, and liabilities of the LLC
they manage [ULLCA Section 303(a)]
• Liability of a member tortfeasor
– Tortfeasor: A person who intentionally or
unintentionally (negligently) causes injury or death
to another person
–A tortfeasor is liable to persons he or she
injures and to the heirs of persons who die
because of his or her conduct

71. Management of An LLC
Type of LLC Description
Member-
managed LLC
The members do not designate
managers to manage the LLC.
The LLC is managed by its
members.
Manager-
managed LLC
The members designate certain
members or nonmembers to
manage the LLC. The LLC is
managed by the designated
managers; nonmanager members
have no right to manage the LLC.

72. Agency Authority to Bind an
LLC to Contracts
Type of LLC Agency Authority
Member-
managed LLC
All members have agency
authority to bind the LLC to
contracts.
Manager-
managed LLC
The managers have authority to
bind the LLC to contracts; the
nonmanager members cannot
bind the LLC to contracts.

73. Duty of Loyalty
• A duty owed by a member of a member-
managed LLC and a manager of a manager-
managed LLC:
– To be honest in his or her dealings with the LLC
– To not act adversely to the interests of the LLC
• No fiduciary duty
– A member of a manager-managed LLC who is not a
manager:
• Owes no fiduciary duty of loyalty or care to the LLC or
its other members

74. Nature of the Corporation
• A fictitious legal entity that is
created according to statutory
requirements
• Corporation codes: State statutes
that regulate the
formation, operation, and
dissolution of corporations

75. Nature of the Corporation
• Characteristics of a corporation:
– Free transferability of shares
– Perpetual existence
– Centralized management
– Limited liability of shareholders: A general rule
of corporate law which provides that generally
shareholders are liable only to the extent of their
capital contributions for the debts and
obligations of the corporation and are not
personally liable for the debts and obligations of
the corporation

76. Exhibit 5.1 Corporation

77. Publicly Held and Closely Held
Corporations
• Publicly held corporation: Has many shareholders -
securities are usually traded on national stock
exchanges
• Closely held corporation: A corporation owned by
one or a few shareholders
• Revised Model Business Corporation Act: A 1984
revision of the MBCA
– Arranges the provisions of the act more logically
– Revises the language to be more consistent
– Makes substantial changes in the provisions

78. Incorporation Procedures
• Procedure for incorporating a
corporation varies somewhat from
state to state
• Domestic corporation: A
corporation doing business in the
state in which it was formed
16-78

79. Incorporation Procedures
• Articles of incorporation: The basic governing
documents of a corporation, which must be filed
with the secretary of state of the state of
incorporation
– Name of corporation
– Number of shares authorized
– Address of registered office and agent
– Name and address of each incorporator
• Registered agent: A person or corporation that is
empowered to accept service of process on
behalf of a corporation

80. Incorporation Procedures
• Corporate bylaws: A detailed set of
rules adopted by the board of directors
after a corporation is incorporated that
contains provisions for managing the
business and the affairs of the
corporation
• Organizational meeting: A meeting that
must be held by the initial directors of a
corporation after the articles of
incorporation are filed

81. Incorporation Procedures
• S Corporations: A corporation that has
met certain requirements and has elected
to be taxed as an S corporation for federal
income tax purposes
–Pays no federal income tax at the corporate
level
–Income or loss flows to the shareholders and
must be reported on the shareholders’
individual income tax returns

82. Financing the Corporation
• Equity securities:
Representation of ownership
rights in a corporation
• Equity securities can be:
–Common stock
–Preferred stock

83. Common Stock
• An equity security that
represents the residual value
of a corporation
• Common stockholder: A
person who owns common
stock

84. Preferred Stock
• Equity security that is given certain
preferences and rights over common stock
• Preferred stock may have any or all of the
following preferences, rights, or attributes:
– Dividend preference
– Liquidation preference
– Cumulative dividend right
– Right to participate in profits
– Conversion right
– Redeemable preferred stock

85. Authorized, Issued, and
Outstanding Shares
• Authorized shares: The number of
shares provided for in a
corporation’s articles of
incorporation
• Issued shares: Authorized shares
that have been sold by a
corporation

86. Debt Securities
• Securities that establish a debtor–
creditor relationship in which the
corporation borrows money from the
investor to whom a debt security is
issued
• Classifications:
–Debenture
–Bond
–Note

87. Indenture Agreement
• Contract between the corporation
and a holder of a debt security

88. Shareholders
• Owners of a corporation who elect
the board of directors and vote on
fundamental changes in the
corporation

89. Exhibit 5.2 Shareholders

90. Shareholders
• Shareholders meetings: A meeting
of the shareholders of a corporation
that must be held by the
corporation to elect directors and to
vote on other matters
–Annual
–Special
–Proxy

91. Shareholders
• Quorum: The number of directors
necessary to hold a board meeting
or transact business of the board
• Supramajority voting requirement:
A requirement that a greater than
majority of shares constitutes a
quorum of the vote of the
shareholders

92. Shareholders
• Straight voting: A system in which each
shareholder votes the number of shares
he or she owns on candidates for each
of the positions open
• Cumulative voting: A system in which a
shareholder can accumulate all of his or
her votes and vote them all for one
candidate or split them among several
candidates

93. Shareholders
• Dividend: A distribution of profits of the
corporation to shareholders
• Piercing the corporate veil: A doctrine
that says if a shareholder dominates a
corporation and uses it for improper
purposes, a court of equity can disregard the
corporate entity and hold the shareholder
personally liable for the corporation’s debts
and obligations

94. Board of Directors
• A panel of persons who are elected
by shareholders to make policy
decisions concerning the operation
of a corporation
–Inside director (executive)
–Outside director (non-
executive, independent)
16-94

95. Exhibit 5.3 Board of Directors

96. Board of Directors
• Regular meetings of a board of
directors are held at the times and
places established in the bylaws
• A board can call special meetings of
the board of directors as provided in
the bylaws

97. Corporate Officers
• Employees of a corporation who
are appointed by the board of
directors to manage the day-to-
day operations of the
corporation

98. Exhibit 5.4 Corporate Officers

99. Fiduciary Duties of Directors
and Officers
• The duties of care and loyalty owed by
directors and officers to their corporation and
its shareholders
– Duty of loyalty: A duty that directors and officers
have not to act adversely to the interests of the
corporation and to subordinate their personal
interests to those of the corporation and its
shareholders
– Duty of care: A duty of corporate directors and
officers to use care and diligence when acting on
behalf of the corporation

100. Sarbanes-Oxley Act
• A federal statute enacted by Congress to
improve corporate governance
• The goals of the Sarbanes-Oxley Act are
to improve corporate governance
rules, eliminate conflicts of
interest, and instill confidence in
investors and the public that
management will run public companies
in the best interests of all constituents

101. Mergers and Acquisitions
• A situation in which one corporation
is absorbed into another corporation
and ceases to exist
• A merger occurs when one
corporation is absorbed into another
corporation
–Surviving corporation
–Merged corporation

102. Exhibit 5.5 Merger

103. Dissolution of the Corporation
• Voluntary dissolution
• Administrative dissolution
• Judicial dissolution
• Winding up, liquidation, and
termination

104. Multinational Corporations
• Multinational corporations operate
in more than one country
• Operate in other countries through
a variety of means, including the use
of agents, branch offices, subsidiary
corporations, business alliances,
strategic partnerships, franchising,
and other arrangements

105. 2.4
OTHER FORMS

106. Limited Liability Partnership (LLP)
• A special form of partnership in which:
–All partners are limited partners
–There are no general partners
• LLPs enjoy the flow-through tax benefit of
other types of partnerships
• Articles of limited liability partnership
–The formal documents that must be filed at
the secretary of state’s office of the state of
organization of an LLP in order to form the LLP

107. Limited Liability of Partners
• The liability of LLP partners for
the LLP’s debts, obligations, and
liabilities, is limited to the extent
of their capital contributions
–Partners of LLPs are not personally
liable for the LLP’s
debts, obligations, and liabilities

108. Exhibit 5 - Limited Liability
Partnership (LLP)

109. 5 - 109
The Professional Corporation
 Designed for professions –
lawyers, doctors, dentists, accountants and
other professionals
 Created in the same manner as a
corporation
 Identified by the abbreviations:
 P.C. – Professional Corporation
 P.A. – Professional Association
 S.C. – Service Corporation

110. The Joint Venture
Much like a partnership, but it:
Is formed for a specific
purpose
Has a beginning and an end

111. Conclusion
The “right” choice of the form of
ownership is unique to every
entrepreneur and their business.
Each form has advantages and
disadvantages.
The entrepreneur must be
thoughtful and strategic about this
important decision.

112. Exhibit 6 - Franchise

113. Types of Franchise
Type of Franchise Description
Distributorship
franchise
A franchise in which the franchisor manufactures a
product and licenses a franchisee to distribute the
product to the public.
Processing
plant franchise
A franchise in which the franchisor provides a secret
formula or process to the franchisee, and the
franchisee manufactures the product and distributes
it to retail dealers.
Chain-style
franchise
A franchise in which the franchisor licenses a
franchisee to make and sell its products or distribute
its services to the public from a retail outlet serving
an exclusive territory.
Area
franchise
A franchise in which the franchisor authorizes a
franchisee to negotiate and sell franchises on its
behalf in designated areas. The area franchisee is

114. Franchise Agreement
• An agreement that a franchisor and
franchisee enter into that sets forth the
terms and conditions of a franchise
• Liability of franchisors and franchisees
–The franchisor deals with the franchisee as an
independent contractor
• Franchisees are liable on their own contracts and
are liable for their own torts
• Franchisors are liable for their own contracts and
torts

115. Exhibit 7 - License

116. CASE DISCUSSION :
PREMIER OIL

117. Casestudy 3 : Premier Oil
1. Read and prepare the Casestudy on
Premier Oil (Monks & Minow (2011).
Identify the corporate governance
issues faced.
2. You are required to:
– Analyse the scenario’s in the
case study and plot the resulting
risk analysis on an appropriate
risk map.
– Map out the stakeholder
power/interest issues, and
propose the appropriate
corporate actions.

118. Risk Map Action
High
Medium
Low
Low Medium High
S
I
G
N
I
F
I
C
A
N
C
E
PROBABILITY
Requires
close
monitoring
Manage
and
monitor
Significant
focus and
action
Accept
but
monitor
Management
effort
worthwhile
Manage
and
monitor
Accept
risks
Accept but
periodically
review
Accept
but
monitor

119. Stakeholder mapping

120. Core Readings
• Baron, David P.(2013) Business and its
environment, 7th Edition, Pearson, Ch.14
• Cheeseman, Henry R.(2013) Business law, 8th
Edition, Prentice Hall. Ch.14-16
• Barringer, Bruce R. & Ireland, R. Duane, 2011
Entrepreneurship – Successfully launching new
ventures 4th edition, Pearson.

121. Next Week’s Ideas for Discussion
• Prem Sikka, (2008),"Enterprise culture
and accountancy firms: new masters of
the universe", Accounting, Auditing &
Accountability Journal, Vol. 21 Iss: 2 pp.
268 - 295

122. QUESTIONS?