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280 Chapter 10Companies (1): Characteristics and formation

Unlimited companies

Slightly under half of one per cent of registered companies are unlimited companies. These

companies do have a legal personality of their own, distinct from that of the company

members, but the members have agreed that they will assume unlimited liability for the

debts of the company. Public companies may not register as unlimited companies.

Unlimited companies enjoy some advantages over limited companies. For example, their

accounts need not be published or delivered to the Registrar of Companies. However, these

advantages are generally considered to be far outweighed by the unlimited liability of the

members.

The names of unlimited companies must not contain the words ‘limited’ or ‘Ltd’.

Limited companies

Limited companies can themselves be classified into two types: companies limited by shares

and companies limited by guarantee.

Companies limited by shares

The vast majority of companies are limited by shares. As we have seen, this means that in

the event of liquidation of the company a member’s liability is limited to paying off any

amount unpaid on his or her shares. (When any reference to a company is made it should be

assumed that the company is limited by shares unless there is an indication to the contrary.)

Companies limited by guarantee

The liability of members of companies limited by guarantee is restricted to paying an

amount which they have agreed to pay in the event of the company going into liquidation.

This amount is usually small, typically £5, and is spelt out in the application for registration,

a document which must be registered with the Registrar of Companies when the company

is formed.

Public companies

Name must end with the words ‘Public Limited

Company’ or ‘plc’

Must have £50,000 allotted share capital, one

quarter of which must be paid up

Shares can be listed on stock exchange (no

requirement that they should be listed)

Must have at least two directors

Shares allotted by the company must be paid for in cash

(or qualified auditor must value assets given as payment)

Must have a company secretary, who must be

suitably qualified

Must hold AGM every calendar year

Cannot pass written resolutions

Private companies

Name must end with ‘Limited’ or ‘Ltd’

(unless the company is unlimited)

No limit on share capital

Shares cannot be listed on stock

exchange, or advertised for sale

Need have only one director

Shares can be given away by the company

No need to have a company secretary. If

there is one, does not need to be qualified

No AGM unless positive decision taken to

hold one

Can pass written resolutions

Table 10.1 Differences between public and private companies