ABOUT THE FOUR DIFFERENT TYPES OF PUBLIC COMPANY
This is the by far the most common type of public company.
A 'company limited by shares' is a company formed on the principle of having the liability of its members (otherwise known as its shareholders or owners) limited to the balance amount (if any) which remains unpaid on the shares held by its members - sections 9 and 516 of the Corporations Act 2001.
Accordingly, if the members have paid for their shares in full and the company gets into financial strife (for example by owing more that the total value of its assets) then, even so, the members will not* be required to contribute any further money to the company to go towards to paying for any such shortfall.
However, if the members do have amounts remaining unpaid on their shares, the most those members can be required to contribute to the shortfall is the amount remaining unpaid on their shares.
*A note of
warning: If the members are also directors of the company, they may be
exposed to further liability (for example, if they allowed the company
to incur the debts at a time when they knew the company would be unable
to repay those debts - sections 588G
of the Corporations Act 2001 - and may have additional civil and criminal liabilities
- sections 588G(3)
of the Corporations Act 2001.)
A 'company limited by guarantee' is a company formed on the principle of having the liability of its members limited to the respective amounts that the members undertake to contribute to the property of the company if it is wound up - section 9 of the Corporations Act 2001.
A company limited by guarantee may only be formed as a public company - section 112(1) of the Corporations Act 2001.
Public companies limited by guarantee are generally used as entities for the incorporation of clubs and sporting bodies rather than for typical business concerns. Also, mutual insurance companies have traditionally been companies limited by guarantee with policyholders being the members.
A public company limited by guarantee, being a limited company, ordinarily needs to have the word 'Limited' (or the abbreviations 'Ltd' or 'Ltd.') included in its name. However a public company limited by guarantee may be formed without the word 'Limited' (or the abbreviations 'Ltd' or 'Ltd.') in its name if it has a written constitution and the constitution meets all of the following three requirements:
Public companies limited by guarantee can no longer be formed having shareholders - they may only have members. For companies other than companies limited by guarantee, the terms 'members' and 'shareholders' are generally synonymous and are therefore often used interchangeably. Accordingly, if you decide to form a public company limited by guarantee please read any future references to 'members/shareholders' as simply being a reference to 'members'.
Public companies limited by guarantee must not pay dividends to their members - section 254sa of the Corporations Act 2001.
See section 285a
of the Corporations Act 2001 for a summary of the financial reporting obligations
of companies limited by guarantee (and section 45B of the Corporations Act 2001
for the definition of a "small company limited by guarantee").
An 'unlimited company' is a company whose members have no limit placed on their liability - section 9 of the Corporations Act 2001.
Accordingly, even if the members have paid for their shares in full and the company gets into financial strife (for example, by owing more than the total value of its assets) then the members could be required to contribute further money to the company to go towards such a shortfall.
Unlimited companies are far less common than companies limited by shares.
Unlimited companies must always have a share capital - section 112(1) of the Corporations Act 2001.
contrast to the various restrictions on reductions to share capital and
on share buy-backs which apply to companies limited by shares, an unlimited
company may reduce its share capital in any way it chooses - section 258A
of the Corporations Act 2001.
No liability companies are essentially companies that are specified to be no liability companies on their formation - section 9 of the Corporations Act 2001.
A no liability
company must meet the following requirements:
by a person of a share in a no liability company, whether by issue or
transfer, does not constitute a contract by the person to pay:
(section 254M(2) of the Corporations Act 2001)
Also, the normal Corporations Act 2001 provision making holders of partly paid shares liable to pay calls on shares in accordance with their terms of issue, does not apply to a no liability company - section 254M(1) of the Corporations Act 2001.
There are special rules about making calls for payment on shares in no liability companies - section 254P of the Corporations Act 2001 - and about the automatic forfeiture and sale of shares for failure to pay calls on shares. There is also a special rule about the redemption of forfeited shares in certain circumstances - section 254R of the Corporations Act 2001.
in a no liability company is not entitled to a dividend on a share if
a due call has been made on the share and the call remains unpaid - section
of the Corporations Act 2001.
If a no liability company is wound up and a surplus of property remains to be distributed, then irrespective of whether all or any money is paid up on its shares, the surplus must be distributed to the shareholders in proportion to the number of shares they each hold - section 254B(2)(a) of the Corporations Act 2001. However if a shareholder is in arrears in payment of a call on a particular share, without already having forfeited the share, the shareholder may only receive a distribution of the surplus in respect of that share after the shareholder has fully paid the call owing on the share - section 254B(2)(b) of the Corporations Act 2001.
If a no liability company ceases to carry on business within 12 months after being formed and is wound up, then in the winding up, shares issued for cash (to the extent of the cash contributed) rank in priority to shares issued for consideration other than cash to vendors or promoters (or both) - section 254B(3) of the Corporations Act 2001.
The holders of vendors' or promoters' shares in a no liability company are not entitled to any preference in a winding up of the company, irrespective of anything in the company's constitution and irrespective of the terms on which the shares are on issue - section 254B(4) of the Corporations Act 2001.
other special rules about the application of property on the winding up
of no liability companies - section 478(5)
of the Corporations Act 2001 - and about the liability of shareholders to contribute
- section 514(2)
of the Corporations Act 2001.
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