There are three major types of companies:

  • Companies Limited by Shares
  • Companies Limited by Guarantee
  • Unlimited Companies

Section 15 of the Companies Ordinance 1984 sates:

Any three or more persons associated for any legal purpose may, by subscribing their names to a memorandum of association and complying with the requirements of this Ordinance in respect of registration, form a public company and any one, or more persons so associated may in like manner from a private company.

A company formed under sub-section (1) may be a company with or without limited liability —

  • a company limited by shares; or
  • a company limited by guarantee; or
  • an unlimited company

Companies Limited by Shares

“Company Limited by Shares" is a company in which the liability of the members (shareholder) of the company is limited to the amount of share capital that they have contributed which means that the owners will only suffer a damage or loss to the extent of the amount contributed as capital in case the company is closed and its assets are insufficient to repay its liabilities. 

Section 2 (8) of the Companies Ordinance 1984 sates:

"company limited by shares” means a company taking the liability of its members limited by the memorandum to the amount, if any, unpaid on the shares respectively held by them.

Companies Limited by Guarantee

In companies limited by guarantee the shareholders guarantee to contribute a specific amount to repay the liabilities of the company in case of winding up o the company.

Section 2 (9) of the Companies Ordinance 1984 sates:

"company limited” by guarantee means a company having the liability of its members limited by the memorandum to such amount as the members may respectively thereby undertake to contribute to the assets of the business or company in the event of its winding up.

A company limited by guarantee may or may not have a paid-up capital.

Unlimited Companies

In case of unlimited companies the liability of the shareholders or members is unlimited. As far as liability of members is concerned an unlimited company is just like a partnership the only difference is that it has a separate legal entity.

financial accounting

May 09, 2017