There are three types of the companies which may be formed under the Companies Act, 2017:
- Company limited by the shares
Companies limited by the shares, restrict (by law) the liability of its owners to the extent of face value of the shares they own in a company. The remaining liability (i.e. other than the limit) falls upon the company instead of its owners. These companies are able to raise additional capital by issuing new shares.
- Company Limited by the guarantee
Companies limited by the guarantee, restrict (by law) the liability of its owners to the extent they guarantee to contribute in the event of liquidation of the company (if the company has no share capital) and in case a company has share capital, this shall also include the amount of share capital they subscribed. These companies are restricted to raise additional capital by issuing new shares. Normally, these types of companies are formed for trade associations or clubs.
- Unlimited Company
It is possible or allowed to incorporate a company as an unlimited liability company with the Securities and Exchange Commission of the country. The only difference between company limited by the shares and the company having unlimited liability is “the unlimited liability company imposes no restriction to the owners of the business against the liabilities/debts”. These types of companies are very rare and are used mostly by the Partnership type of business.
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