Definition of the following company concepis : Companies Act (71 Of 2008) - Separation of ownership Memorandum of incorporation - Pimited liability Mention advantanal Income of listing a company at the JSE Provide reasons why companies should comply with IFRS when completing the financial statements Explain the roles of Directors Explain in detail how average issue price is calculated How does retaining of profit benefits a company.

**Companies Act (71 of 2008)** - **Separation of Ownership** This principle means that the ownership (shareholders) of the company is separate from its management. Shareholders invest in the company and appoint professional managers and directors to run day-to-day operations. This separation minimizes direct involvement in management decisions and limits the shareholders' liability to the extent of their investment. **Memorandum of Incorporation (MOI)** - The MOI is a constitutional document that sets out the rights, duties, and responsibilities of shareholders, directors, and other stakeholders. - It establishes the rules for the company’s governance and operational framework, including the company’s objectives, powers, and procedures for decision-making. - The MOI defines the relationship between the company and its members, overriding any conflicting agreements unless otherwise specified by law. **Limited Liability** - Limited liability means that the financial responsibility of the company’s shareholders is restricted to the amount they have invested. - Shareholders are not personally accountable for the company’s debts or liabilities beyond their shareholding. - This concept encourages investment by reducing personal risk, as investors know that their losses are limited to their initial capital contribution. **Advantages of Listing a Company at the JSE (Johannesburg Stock Exchange)** - **Access to Capital:** Listing facilitates easier access to a wide pool of capital from public investors, which can be used for expansion and growth. - **Enhanced Liquidity:** Shares listed on the JSE can be bought and sold freely, providing liquidity for investors. - **Brand Visibility and Credibility:** A listing increases a company’s profile, potentially attracting more investors, customers, and business partners. - **Regulatory Oversight:** Being listed imposes strict regulatory standards, which can lead to improved corporate governance and transparency. - **Valuation and Benchmarking:** Public listing provides a market value of the company, offering a clear benchmark for performance and value. **Reasons for Complying with IFRS When Completing Financial Statements** - **Transparency:** IFRS promotes transparency in financial reporting, ensuring that financial statements provide clear and comparable information about the company’s financial performance. - **Comparability:** It enables investors and stakeholders to compare financial statements of companies from different regions or industries on a like-for-like basis. - **Credibility:** Compliance with internationally recognized standards increases the credibility of the financial statements, bolstering investor confidence. - **Consistency:** IFRS ensures consistent accounting methods over time, making it easier to track performance and trends. - **Global Integration:** For companies operating internationally, IFRS compliance facilitates smoother cross-border transactions and investments. **Roles of Directors** - **Strategic Leadership:** Directors set the long-term vision and strategic direction of the company. - **Governance and Oversight:** They ensure that the company complies with legal and regulatory requirements and adheres to its policies and risk management practices. - **Fiduciary Duty:** Directors are responsible for protecting shareholders' interests by acting in the best interest of the company, typically involving prudence and care in decision-making. - **Decision Making:** They make high-level decisions, including appointing management, approving budgets, and determining major capital expenditures. - **Monitoring Performance:** Directors oversee the implementation of the company’s strategy and monitor the performance of executive management. **Calculation of Average Issue Price** - When a company issues shares at various prices over a period, the average issue price is determined by dividing the total funds raised by the total number of shares issued. - The formula can be expressed as: \[ \text{Average Issue Price} = \frac{\text{Total Amount Raised}}{\text{Total Number of Shares Issued}} \] - For example, if a company raises a total of \(\$1,000,000\) by issuing 100,000 shares, the average issue price would be: \[ \frac{1,000,000}{100,000} = \$10 \text{ per share} \] **Benefits of Retaining Profit for a Company** - **Reinvestment in Growth:** Retained earnings can be reinvested in research and development, capital expenditures, or expansion projects, fueling future growth. - **Strengthening Financial Position:** Keeping profits within the company increases its equity and improves its balance sheet, which can lead to better credit ratings and lower borrowing costs. - **Flexibility:** Retained profits provide a company with the flexibility to take advantage of new opportunities or weather economic downturns without having to depend on external financing. - **Dividend Policy:** While not distributed as dividends, retained earnings can later be used to reward shareholders through special dividends or share buybacks. - **Internal Financing:** It reduces the need for external debt, thereby minimizing interest costs and the risk associated with high leverage.