 |
| |
|
 Types of companies |
|
 |
|
 |
|
Author: Christopher BevanThis is an extract from Lawbook Company's Nutshell: Corporations Law by Christopher Bevan (Sydney: LBC, 1999, 4th ed). LBC Nutshells are the essential revision tool: they provide a concise outline of the principles for each of the major subject areas within undergraduate law. Written in clear, straightforward language, the authors clearly explain the principles, and highlight key cases and legislative provisions for each subject.
Section 112 contains a table which provides that the following types of companies can be registered under the Corporations Law :
- Proprietary companies which fall into the following two sub-categories:
(i) Proprietary companies whose capital is limited by shares; and
(ii) Proprietary companies whose share capital is unlimited;
- Public companies which fall into the following categories:
(iii) Public companies whose capital is limited by shares;
(iv) Public companies whose share capital is limited by guarantee;
(v) Public companies whose share capital is unlimited;
(vi) Public companies which are no liability companies.
Company limited by shares
This is the most common form of company. Most companies' constitutions prescribe the shares of the members in relatively low denominations. For example, the usual share capital is described as $10,000 divided into 10,000 shares of $1 each. Normally, two persons subscribe for one or two shares each, although now only one person need do so as one man companies are now permissible under the Corporations Law . The subscribers are bound to pay for the shares in money or money's worth. Each is under a liability, on the issue of the shares, to pay for the full value of each share subscribed to its "paid-up" value. So in the event of debts being incurred by the company, the member's liability is limited to the nominal value of the shares, unlike the sole trader or partner whose liability is unlimited. Thus, a shareholder's personal liability, over and above the amount subscribed, is said to be limited to the amount (if any) unpaid on her or his shares (that is, a personal liability in excess of the paid-up value of the shares can only exist if the shareholder holds partly-paid shares).
Shares no longer have a par value but merely have a nominal value: s 254AA (see below). The nominal value is the value stated for the shares in the application for their issue: s 120(2). Furthermore there is power in a company to issue partly paid shares: s 254A(1)(c). If shares in a company are partly paid the shareholder is liable to pay calls on the shares in accordance with the terms on which the shares are on issue (although this does not apply to a no liability company shares where there is no liability on the part of the shareholder to pay calls): s 254M. The acceptance 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 either calls in respect of a share or any contribution to the debts and liabilities of the company: s 254M(2).
Company limited by guarantee
Section 9 defines such a company as one 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 in the event of its being wound-up.
A company limited by guarantee has provision for special requirements for its constitution, not being requirements for other types of companies: see s 179.
It is provided in the Act that, in the case of a company limited by guarantee, the constitution shall state that the liability of the members is limited and that each member undertakes to contribute to the property of the company, in the event of its being wound-up while he or she is a member or within one year after ceasing to be a member, for payment of the debts and liabilities of the company contracted before ceasing to be a member, for the costs, charges and expenses of winding-up, and for adjustment of the rights of the contributories among themselves, such amount as may be required not exceeding a specified amount.
Pursuant to s 517, upon the winding-up of a company, no contribution in the case of a company limited by guarantee is required from a member exceeding the amount undertaken to be contributed by that member to the property of the company.
Thus, when a company limited by guarantee is a going concern, there is no obligation for a member to subscribe to the amount of her or his guarantee; it is only in the event of winding-up that the member's legal liability arises. In a company limited by shares, this liability arises each time there is a call made until the shares are fully paid.
A call is the company imposing a requirement on a shareholder to make a payment towards the cost of subscription for a share. Calls can be made up to the nominal value of the share, and can be made at any time until the share has been paid to nominal value. Calls can only be made when the share has not been fully paid by the subscriber at the date of issue of the shares. Calls can be made by the liquidator during a winding-up, as regards shares which are not fully paid at the date of the winding-up, where there is a deficit of assets to pay creditors.
Unlimited company
Section 9 defines unlimited company as meaning a company whose members have no limit placed on their liability. The constitution shall state that the liability of the members is unlimited.There is no further requirement that a company's constitution state what its paid-up capital is nor the classes of the shares that are on issue. The company's constitution now need only show (being a permissive requirement rather than a mandatory requirement) what its objects are and whether or not there is any express restriction on or prohibition of a company's exercise of any of its powers: s 125.
No liability company
Section 112(2) provides that a company may be registered as a no liability company only if:
(a) the company has a share capital; and
(b) the company's constitution states that its sole objects are mining purposes; and
(c) the company has no contractual right under its constitution to recover calls made on its shares from a shareholder who fails to pay them.
Section 112(3) provides that a no liability company must not engage in activities that are outside its mining purposes objects. Furthermore, s 112(4) provides that the directors of a no liability company must not:
(a) let the whole or proportion of a mine or claim on tribute; or
(b) make any contract for working any land on tribute;
unless:
(i) the letting or contract is approved by special resolution; or
(ii) no such letting or contract has been made within the period of two years immediately preceding the proposed letting or contract.
Section 148(4) provides that a no liability company must have the words "no liability" at the end of its name.
This article should be read in conjunction with Changing type of company.
Christopher Bevan
BEc LLM (Hons)(Syd)
Barrister
Wentworth Chambers
1999
March, 2001
|
|
 |
|
