Types of companies Flashcards
What is a Private Company Limited by Shares (Ltd)?
A company with no minimum share capital requirements and prohibited from offering shares (and bonds) to the public
What are the characteristics of a Private Company Limited by Guarantees?
No share capital, liability limited to agreed contribution, membership not transferable, rare
Members’ liability is limited to the amount they agreed to contribute in the event of winding up.
What defines an Unlimited Private Company?
Liability is unlimited (very rare)
What is a Public Company Limited by Shares?
- Can offer their shares to the public – to generate more funds
- Need a minimum of 2 directors
- Minimum share capital requirement of £50,000
- Requires a trading certificate before it can trade
- Must have a company secretary and AGMs
- Subject to more onerous regulatory requirements
What does it mean for a company to be ‘listed’?
It means the company is admitted on a regulated stock exchange
What type of company can become listed?
Only public companies
What are the benefits of being a listed company?
Access to a wider investor base and international debt capital markets
True or False: Private subsidiary companies are unaffected by the rules governing their listed holding companies.
False
Private subsidiary companies are affected by rules that govern their listed holding companies.
When does a company become a separate legal entity?
A company becomes a separate legal person from the date of incorporation.
What does separate legal personality allow a company to do?
It allows the company to have its own existence and personality, own property, sue and be sued, and enter into its own contracts.
To whom do directors owe their duties?
Directors owe duties to the company, not to shareholders.
Who can the SHs enforce their rights against?
Shareholders have rights against the company.
What is limited liability in a company limited by shares?
Salomon v Salomon
Limited liability means shareholders are only liable for the amount they paid for their shares (personal assets are seperate)
Can creditors claim against shareholders?
Creditors can claim against the company but not against shareholders.
What occurs during insolvency for shareholders?
Insolvency leads to shareholders losing the money they have invested in the company.
What are the advantages of limited liability?
- Shareholders can passively invest knowing their assets have been safe
- Risker business divisions can be conducted through separate companies within the group without the less risky companies becoming vulnerable to creditors
What might banks require from shareholders to circumvent their limited liability?
Banks can require guarantees from shareholders.
How should creditors assess a company’s financial viability?
Creditors should check the publicly filed documents at Companies House.
