Company Limited by Shares

09/07/2020 0 By indiafreenotes

According to Section 2 (22) of the Companies Act 2013, a company that is limited by shares is refers to a company that has the liability of the members limited by such an amount that is unpaid on their respectively held shares. The company can enact this liability while the company is in existence or as it is ending.

Limited by shares refers to the liability of the shareholders to the creditors of the business for the money that was invested originally.

According to the Companies Act 2013, if the liability of the company members is limited by the amount not paid on shares they hold, this is referred to as a company limited by shares. The shareholder has to meet the debits of the company only to the extent that is unpaid on his shares and no separate property can be used to meet the debt.

A company that is limited by shares will divide the share capital into fixed amount shares that can then be issued to shareholders and subsequently become company owners. A company limited by shares can be financed using loans, equity, and grants.

There are two different limited companies:

  • Limited Company by Guarantee: This company has no shareholders. It contains members who contribute small amounts to pay for any outstanding debt if there is the possibility of a liquidation.
  • Public Limited Company: This company typically trades publicly. Shareholders only have to be liable for their own individual investment value.

An LTD is most commonly incorporated for private and commercial ventures. It is limited by shares and has the liability of the members limited by its own Constitution. This type of company does not include an objectives clause. This way, it can trade in any legal business that the shareholders deem fit.

A small or medium company will need to file shorter audited accounts with not as much information with the Companies Registration Office. An annual return also needs to be field each year even if the company never traded.