Part D The formation and constitution of business organisations 12: Corporations and legal personality 1813 Types of company
Most companies are those incorporated under the Companies Act. However there are other types of
company such as corporations sole, chartered corporations, statutory corporations and community
interest companies.Corporations are classified in one of the following categories.Categories Description
Corporations sole A corporation sole is an official position which is filled by one person
who is replaced from time to time. The Public Trustee and the
Treasury Solicitor are corporations sole.
Chartered corporations These are usually charities or bodies such as the Association of
Chartered Certified Accountants, formed by Royal Charter.
Statutory corporations Statutory corporations are formed by special Acts of Parliament. This
method is little used now, as it is slow and expensive. It was used in
the nineteenth century to form railway and canal companies.
Registered companies Registration under the Companies Act is the normal method of
incorporating a commercial concern. Any body of this type is properly
called a company.
Community Interest Companies
(CICs)A special form of company for use by 'social' enterprises pursuing
purposes that are beneficial to the community, rather than the
maximisation of profit for the benefit of owners, created by the
Companies (Audit, Investigation and Community Enterprise) Act 2004.3.1 Limited companies
The meaning of limited liability has already been explained. It is the member, not the company, whose
liability for the company's debts may be limited.3.1.1 Liability limited by shares
Liability is usually limited by shares. This is the position when a company which has share capital states
in its constitution that 'the liability of members is limited'.3.1.2 Liability limited by guarantee
Alternatively a company may be limited by guarantee. Its constitution states the amount which each
member undertakes to contribute in a winding up (also known as a liquidation). A creditor has no direct
claim against a member under their guarantee, nor can the company require a member to pay up under
their guarantee until the company goes into liquidation.
Companies limited by guarantee are appropriate to non-commercial activities, such as a charity or a trade
association which is non-profit making but wishes to have a form of reserve capital if it becomes
insolvent. They do not have share capital.3.2 Unlimited liability companies
An unlimited liability company is a company in which members do not have limited liability. In the event
of business failure, the liquidator can require members to contribute as much as may be required to pay
the company's debts in full.Key term
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