3. Types of companies

Who may form a company

Section 15 says any two or more persons may form and incorporate a company by complying with the Act, and a private company may be formed by one person. Section 17 bars an individual from forming or joining in forming a company if he is under 18, of unsound mind, an undischarged bankrupt, or otherwise disqualified from being a director. A corporate body in liquidation may not join in forming a company.

Classified by liability

Section 18 says a company may be:

Limited by shares: each member's liability is limited to the amount, if any, unpaid on his shares. This is the usual trading company.

Limited by guarantee: each member undertakes to contribute up to a stated amount if the company is wound up. This form suits clubs, charities and non-profit bodies. On dissolution its surplus property is not shared among the members. It goes to a similar company limited by guarantee or to a charitable object.

Unlimited: there is no limit on the members' liability. The company is still a separate person, but if it is wound up the members must make good its debts.

Private and public companies

Any of these may be private or public. Under section 19 a private company is one whose memorandum states that it is private. A private company restricts the transfer of its shares and may not offer its shares or debentures to the public. A company that is not private is public, and only a public company may raise money from the public.

The Act lets a company re-register from private to public and back again, and from limited to unlimited and back, under sections 45 to 48.

Other ways companies are described

Statutory corporations are created by their own Act of Parliament, not registered under the Companies Act.

A holding company and its subsidiary: one company controls another, usually by holding a majority of its votes or controlling its board. Each is still a separate legal person.

A one-person company is a private company with a single member, which section 15 allows.