Types Of Companies Notes

Topic 3: Types of Companies

1. Classification according to liability of members 112(1)

   1. Company limited by shares

      1. Most common type. The name will be followed by ‘ltd’ 148(2)

      2. Can raise capital by issuing shares to investors

      3. Liability of members is limited to the unpaid amount of their shares 9

      4. Winding up:

         • A past shareholder (who has been a shareholder within one year of the company winding up 532 can be liable to contribute if the existing shareholders are unable to satisfy the contribution they are liable to make 522

         • In any case, they are not liable for any debt contract after they ceased to be a shareholder 520

   2. Company limited by guarantee

      1. It is a company whose members have their liability limited to the amounts that they have undertaken to contribute (or guarantee) to the company in the event the company is wound up and cannot pay its debts as and when they fall due 9

      2. The company does not have share capital, and only public companies can be this type

      3. The amounts of the guarantee must be set out in the company’s application for registration 177(2)(m)

      4. Drawback: does not raise initial or working capital from its members

      5. Winding up:

         • Members may need to contribute more than they guaranteed 517

      6. Less strenuous reporting requirements for small companies limited by guarantee 285A

         • Small if 45B:

           1. Annual revenue is less than $250,000

           2. It is not a deductible gift recipient

           3. It is not a building society, credit society or credit union

   3. Unlimited company with share capital

      1. Company whose members have no limit placed on their liability to the company 9

      2. Shareholders do not have limited liability and are wholly liable for all debt that the company accrues 515

         • However this will only arise if the company is unable to meet its liabilities after it was been wound up

   4. No liability companies

      1. Members of a no liability company are not even liable for the unpaid amount on their shares

      2. A failure to pay a call made by the company on shares will, however, mean that the shareholder is liable to forfeit the share

      3. 112(2) can only be mining companies.

      4. Must have the words no liability at the end of it’s name

      5. Must be a public company and: 162

         • Have share capital

         • State in constitution that its sole objects are mining

         • Have no contractual right to recover calls made on its shares from a shareholder who fails to pay 112(2)

2. Classification according to public/proprietary status

   1. Public

      1. A public company is a company that is not a proprietary company 9

      2. Types:

         • Limited by shares

         • Limited by guarantee

         • Unlimited with...

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