Company Limited By Shares
Definition:
A company limited by shares is a company in which the shareholders own shares, which represent a portion of the company’s ownership. The shareholders are responsible for limiting the company’s liability to their investment in the company.
Key Features:
1. Shareholder Liability:– Shareholders are not personally liable for the company’s debts beyond their investment.- Their liability is limited to the amount of their shareholding.
2. Shares:– Shares represent ownership in the company and are traded on the stock exchange.- The number of shares a person owns determines their ownership percentage.
3. Share Capital:– The company raises capital by issuing shares to investors.- The share capital is the total value of the company’s shares.
4. Dividends:– Companies may pay dividends to shareholders as a return on investment.- Dividends are paid out of the company’s retained earnings.
5. Limited Liability:– The company has a limited liability, meaning that its shareholders are not personally liable for its debts beyond their investment.
6. Corporate Governance:– Companies limited by shares are governed by a board of directors and shareholders.- They are required to follow certain legal and regulatory procedures.
7. Dividends and Capital Returns:– Companies may distribute dividends to shareholders or use retained earnings for growth or expansion.
8. Transferability of Shares:– Shares can be freely transferable on the stock exchange.
9. Publicly Traded:– Many limited companies are publicly traded on stock exchanges, allowing investors to buy and sell shares.
Examples:
- Apple Inc.
- Microsoft Corporation
- Toyota Motor Corporation
Advantages:
- Limited liability for shareholders
- Access to company’s assets and dividends
- Ability to raise large amounts of capital
- Publicly traded companies provide greater liquidity and transparency
Disadvantages:
- Greater regulation and compliance costs
- Potential for shareholder disputes
- Possibility of insolvency if the company fails
