Chapter 11 - Company Formation

Question 1

What are the advantages of a company?

Answer 1

• Limited liability for members, i.e. the liability of its members is limited to the amount, if any, on the shares taken by them;
• the company can sue and be sued, i.e. it has the power to conduct business in its own name;
• tax advantages;
• ability to raise finance on foot of additional security, i.e. the company has assets that it could borrow against;
• ability to have a large number of members;
• perpetual succession, i.e. the company does not dissolve when the directors of the company leave or when the shareholders of the company die;
• clear definition and delineation of management and company;
• the assets of the company are vested in and owned by the company, rather than its members.

Question 2

What is the purpose of a The Companies Act 2014?

Answer 2

The purpose of this Act is to simplify and modify company law, especially the laws relating to private companies limited by shares. Its main aim is to make the law as clear and accessible as possible.

Question 3

In the Companies Act 2014, what are the different company types?

Answer 3

• private company limited by shares (LTD);
• designated activity company limited by shares/limited by guarantee with share capital (DAC);
• public limited company (PLC);
• company limited by guarantee (CLG); and
• Unlimited companies : private unlimited company having a share capital (ULC); public unlimited company having a share capital (PUC); and public unlimited company not having a share capital (PULC).

Question 4

What’s a limited liability company - company limited by shares?

Answer 4

If a company has limited liability it means that, in the event that the company
fails, the debts of the company are not the debts of the members, i.e. the
members’ liability is to the company and is limited to the amounts unpaid in
respect of shares issued to them. Members are not liable to creditors of the
company for debts of the company.