Internal Code : MAS3945
Case Study :
Sara Crouch is the Managing Director of Floral Treats Ltd (‘Floral’), a small private limited company, who is seeking someone to invest in her business. Floral has been trading for more than 10 years manufacturing and selling its own-branded perfumes, lotions and candles to the public in its 15 retail stores and to other larger retail companies. Revenue and profits have been steady over the last 10 years up to the end of 2016. In July 2014 the company appointed a new sales director, Apu Bagchi, who with his experience and contacts in the wider retail sector has overseen the launch of an on-line shop for Floral’s products and secured a lucrative deal with a hotel chain. Sara now believes that the business has further opportunities and does not wish to lose the momentum created by Apu.
he bank that currently provides both the long-term loan and an overdraft facility has rejected Floral’s request for additional funds on the basis that there are insufficient assets to offer for security (the existing funding is secured on Floral’s property, plant and equipment). Sara has therefore approached a business contact, Richard Morris, about potentially investing in Floral.
Brightstar investments (known as ‘Brightstar’)
Richard Morris owned a highly successful technology business which he sold five years ago for £20 million. With the proceeds he then set up an investment company (Brightstar) that invests primarily in smaller private businesses in need of short- to medium-term funding. Richard sits on the board as a non-executive director of a number of the companies that his business has invested in, and is often able to offer valuable business advice to these companies, especially in the area of research and development activities.
a) Floral is currently a Limited Liability (Ltd) company. Explain what is meant by ‘Limited Liability’ in this context, and how this differs from a sole trader company.
Brightstar will be hoping that the company will be able to become a Public Limited Company (PLC) in a few years’ time. Explain the main difference between a Ltd company and a PLC.
b) Explain the purpose of an audit and why an investor like Brightstar would like the company to have one.
c) Identify and explain ONE benefit and ONE drawback of Sara taking on the joint role of Chief Executive and Chairman of Floral (assuming the company becomes a PLC in the future).
d) Explain what a ‘non-executive director’ is.
e) Describe TWO benefits of having non-executive directors on Floral’s Board of Directors.
If Sara Crouch is persuaded that she should not be both Chairman and Chief Executive, she may decide to appoint someone new as the Chief Executive (CEO).
a) In your view, what is the difference between ‘leadership’ and ‘management’?
b) A CEO’s role involves a combination of decision-making, planning and organisation, and leadership. Discuss what these three roles involve, using the information in the case study to give examples of each in the context of Floral.
c) Given the current exciting developments, and the potential expansion of the company in terms of new products and new markets, discuss THREE areas of skills, attributes and / or experience that a good candidate would be expected to demonstrate in order to be offered the position of CEO, explaining why these would be useful for Floral.
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