In Chapter 4 we made a general survey of the different
types of business organisation – the sole trader, the part-
nership, and the corporation. In particular, we considered
the role of the corporation as a business organisation in
the public and private sectors.
This chapter is concerned only with one type of cor-
poration – the registered company – because this is the
basic form of corporate business organisation. The law
relating to registered companies is to be found mainly
in the Companies Act 2006 and case law. All section
references in this chapter are to the Companies Act (CA)
2006 unless otherwise indicated.
Types of registered companies
Registered companies may be limited or unlimited and
public or private.
Limited companies
Most registered companies are limited by shares. This
means that the liability of the members of the company
is limited. The company’s liability is not limited. It must
pay its debts so long as it has any funds from which to
do so.
Where the liability of the members of the company is
limited by shares, it means that once the members have
paid the full nominal value of their shares, plus any pre-
mium that may have been payable on them, they cannot
be asked to pay any more even if the company is wound
up and cannot pay its creditors in full from the funds
that are left.
If, therefore, John Green owns 100 shares issued at £1
each by Boxo plc, then once he has paid £100 to Boxo
plc for them neither he nor anyone else who buys them
from him can be required to pay more. If the shares had
been issued at a premium of 50p, then once John had
paid £150 to Boxo, neither he nor anyone else who
bought the shares from him could be required to pay
more. If John transferred the shares before he had paid
for them in full, then the person who bought them from
him would have to pay the balance if called upon to do
so by Boxo plc.
Companies may also be limited by guarantee. Only
brief mention needs to be made of them in a book on
business law since they are mostly formed for charitable,
social, political or other non-trading purposes. However,
the members are liable only to the amount they have147Chapter 6 Companies
Learning objectives
After studying this chapter you should understand the following main points:
■the types of registered companies and the process of formation;
■the constitution of a registered company;
■the different types of share capital together with loan capital and the
issue of these securities;
■membership rights and meetings together with the provisions to protect
minority shareholders;
■the management of a company through its directors and their powers and
duties;
■methods of corporate rescue and dissolution by winding-up.