Part 3 Types of Companies
The basic types of companies that can be incorporated under the Companies Act 2006 are: unlimited companies, companies limited by guarantee, and companies limited by shares.
Unlimited companies are a fairly rare type of corporation aggregate as each member is jointly and severally liable for the debts of the company in the event of its winding-up. The incorporation of an unlimited company may be suitable where limited liability is not essential but perpetual succession is important. An unlimited company does not have to file accounts with the registrar of companies [Note 1], unless it is the parent or subsidiary of an undertaking whose member’s liability is limited at that time [Note 2]. An unlimited company may or may not have a share capital.
Another type of corporation aggregate is a company limited by guarantee. Each member undertakes upon the winding-up of the company to contribute to its assets up to a specified amount, say £5,000. Since 22 December 1980, a company limited by guarantee cannot be incorporated with a share capital [Note 3]. Network Rail is an example of a company limited by guarantee.
The final type of corporation aggregate is a company limited by shares. Each member’s liability is limited to the amount, if any, unpaid on the shares held by him/her [Note 4]. A company limited by shares can either be a “private company” or a “public company”.
A private company is defined as any company that is not a public company [Note 5]. A private company tends to be smaller than a public company and cannot issue shares to the public [Note 6]. A private company must have at least one director [Note 7], who is a natural person [Note 8]. A private company does not have to have a company secretary [Note 9].
A public company must have an issued share capital of at least £50,000 [Note 10] of which 25% of the nominal value paid up [Note 11] which can be issued to the public. A public company must have at least two directors [Note 12], at least one of whom must be a natural person [Note 13], and a company secretary [Note 14]. A public company is subject to additional regulation which will be dealt with in the appropriate parts of the chapter, for further information see Parts 4, 7, 9, 10, 11 and 12.
The shares in a public company that has been accepted by the Stock Exchange can be bought and sold in the open market.
(Amended December 2011)
Community Interest Companies are companies limited by shares or by guarantee that exist to provide benefits to a community or a specific section of a community [Note 15]. A Community Interest Company is an alternative form to a charity as they are subject to less regulation. However, Community Interest Companies are subject to dual regulations by both the Regulator of Community Interest Companies [Note 16] and the Registrar of Companies. A Community Interest Company is limited in what it can do with its profits and assets [Note 17] and must provide an annual community interest company report [Note 18]. A Community Interest Company is registered with the Registrar of Companies in the same way as a limited company but must also include a community interest statement describing its social purpose [Note 19]. It is possible that a Community Interest Company may be subject to a winding-up order. In the following parts of the chapter the regulations specifically relating to Community Interest Companies have not been included. Further information on Community Interest Companies is contained in Technical Notice T19/05, which is available here. Guidance on dealing with a winding-up order made against a Community Interest Company is contained in paragraph 19 of Technical Notice T19/05.