IMPORTANT: Before adopting the Company Limited by Shares structure, it is vital that you obtain professional advice.
A company that is limited by shares means that the company
- Has shareholders who own the company who can
- Elect and dismiss the board
- Appoint or dismiss auditors
- Change the Memorandum and Articles of Association
- Approve payments of dividends
- Has Limited shareholder liability. In the event of the company becoming insolvent a shareholder will lose the money they invested in the company.
- Is registered with Companies House
- Has a board of directors
- Has a governing document. This is usually defined in the two documents Memorandum and Articles of Association
- Publishes an annual report, annual audited accounts and any details of changes to the board or amendments to the governing document
- May seek funding by selling equity, grants, and loans (secured and unsecured)
There are two types of companies limited by shares
- Private (Ltd) - Shares are not offered to the general public and are therefore not traded on the stock market. Have lighter reporting requirements over public companies.
- Public (Plc) – Shares are offered to the general public and can be traded on the stock market. Reporting requirements are tighter than for private companies
It is not common for Social Enterprises or Charities to adopt a Company Limited by Shares approach. It is important that if adopting this structure, the company’s constitution clearly states its aims and objects and how any profits are distributed.
In general Company Limited by Shares structure is not adopted by Charities
IMPORTANT: Before adopting Company Limited by Shares structure, it is vital that you obtain professional advice.