Tag Archives: Unlimited Liability

Six different types of public and proprietary companies

Corporate law

Following on from my blog on company characteristics, I thought I would write a quick blog on the different types of companies that are common today.

Companies are classified according to liability, size and where they are listed. We will discuss the first two and the resulting 6 common types of companies we arrive at.

Classification according to member liability

1 – Companies limited by shares (known as ‘limited liability’ companies)

Typically, members are usually shareholders and their liability is limited to the nominal (nominal capital is defined as the capital with which the company was incorporated) value of their shares plus any unpaid amount on their shares.

As an example, say you buy BHP shares at $10 for 100 shares, then your liability is limited so that if BHP were to be sued, it is limited to the $10 paid. This is sometimes conducted differently when you don’t fully pay for shares when the company floats. If $5 was paid and $5 was then owed on the shares, then the remaining amount must be contributed should it be called upon.

As we probably know by now, the significance is that shareholders are not liable for the full amount. This is known as the share capital method of corporate finance. Another method is by debt – going to a bank and asking for money to be lent. This is a different contractual agreement. Continue reading Six different types of public and proprietary companies

What is a company, what characterises a company and why form a company ?

limited liability

Companies are….

Most people have a decent concept of what a company is. They could tell you that there are lots of them, they make lots of money, most work for one, and typically that they sell a particular thing or provide a range of services. Most people even know that many companies have “pty ltd” next to their name and some of those people realise that it stands for proprietary limited.

If however, you were to ask someone to define what a company is or what “proprietary limited” actually meant, you may find a few more blank faces. Ultimately, it probably doesn’t matter to the majority of the population, but it is quite critical to understand what defines a company and what distinguishes it from other business forms before considering more complex legal and corporate issues.

The central themes that will continue to arise when thinking about companies are liability, ownership, financing, legal obligations and succession especially in the event that the company can no longer pay its debts when they fall due (insolvency).

Continue reading What is a company, what characterises a company and why form a company ?