If a company is limited by shares it means that the liability of the shareholders to the creditors of the company is limited to the capital originally invested. Therefore, a shareholder’s personal property will not be used to pay the company’s debt.
Private company limited by shares is the most commonly used corporate structure. Most companies, particularly small companies, are private.
The features of private company limited by shares include:
- It has a membership of 2-50 persons.
- The name must end with the word – Limited (Ltd).
- It cannot offer its shares to the public and thus cannot be traded on a public stock exchange.
- It is required to have a minimum authorized share capital of N10,000.00.
- The Articles of Association of a private company limited by shares must restrict the transfer of its shares.
- The company secretary may not possess professional qualifications.
- There is no restriction for appointment of over aged directors.
A private company limited by shares is suitable for small and medium sized businesses with a small capital. Usually, where friends or family members want to engage in business, they can incorporate a private company limited by shares.
A public company limited by shares, on the other hand, is incorporated for large businesses. The features of a public company limited by shares include:
- It has a minimum of 2 members and has no maximum membership.
- The name must end with “Plc”.
- Its minimum authorized share capital is N500,000.00 and at least 25% of the share capital must be allotted at incorporation.
- It can offer its shares and debentures to the public and thus can be traded on the stock exchange.
- The secretary of a public company must be a Lawyer, a Chartered Accountant or a Chartered Secretary.
- Before a person who is 70 years and above, is appointed a director of a public company, a special notice to that effect must be given to its members.
- It is required to hold a statutory meeting within 6 months of incorporation.
- Before any general meeting, every public company must advertise a notice of such meeting in at least two daily newspapers.
Public company limited by shares is suitable for medium or large business organizations with a relatively large start off capital. Also, where the business organization wants to raise capital by inviting the public to subscribe to its shares, it should be registered as a public company limited by shares. Some industry regulations might require some businesses to be registered as a public company, in such circumstances you must comply.