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You are the finance director of Deepwater Ltd, Samit Patel. You have been asked to prepare a report for the Board of Directors on various matters related to the potential acquisition of MaxShale Ltd, and the potential for Deepwater Ltd to become a public limited company (plc), directed by the questions below.
1. Business structure and corporate governance
a) As a result of its expansion plans, the company is considering ultimately seeking a listing on the London Stock Exchange, and becoming a public listed company.
i) Explain the main difference between a private limited company and a public limited company
ii) Identify and discuss TWO advantages and TWO disadvantages for Deepwater of being a plc.
b) Identify and explain FOUR requirements of the UK corporate governance code that applies to companies listed on the London Stock Exchange.
2. The role of management
If Deepwater does decide to become a plc, the current Chief Executive Officer (CEO), Claire Morris, may choose to become the Chairman of the Company, allowing the company to choose a new CEO.
a) A CEO’s role involves a combination of decision-making, planning and organisation, and leadership. Discuss what these three roles involve, using the case study about Deepwater Ltd to give examples.
b) In view of what the new CEO of Deepwater Ltd will be required to do, discuss FOUR skills or attributes that a candidate would be required to demonstrate in order to be offered the job, explaining why they are necessary.
3. PESTEL analysis of the Shale Gas industry
Whether Deepwater decides to buy MaxShale Limited or not, it sees Shale Gas as a major opportunity. Many different factors will determine whether or not the industry will be successful. Prepare a PESTEL analysis of the shale gas industry, identifying and discussing how the following factors could influence it:
Within each of these areas you should identify one or more external factors over which the company has no control, but which could provide an opportunity for a company within this industry to be successful or, alternatively, mean that it may face extra costs, or be unable to make profits. You do not have to discuss an equal number of factors in each of the different areas. You may consider someof these more important than others, but you should try and identify at least one factor in each area.
4 Corporate social responsibility and communication with customers
a) As well as considering the financial reasons whether Deepwater should buy MaxShale, the Board would also like you to consider other non-financial factors including the debate raging about the potential impact of the fracking industry.
i Explain what is meant by ‘corporate social responsibility’
ii ‘Fracking’ is clearly a controversial industry, giving rise to opposing views about its potential impact, as seen in Exhibit 6. Suggest THREE things that a company like MaxShale and other companies in the shale gas industry should do to ensure that they behave as good corporate citizens
b) Suggest THREE ways in which the fracking industry could communicate with potentially hostile stakeholders, in order to ensure that the industry can thrive. The following are examples of such stakeholders:
- Local communities
- Environmental groups
5. Professional Report format
- Marks are allocated for setting out your answer in the format of a professional business report.