Limited company is a type of business which is owned by many numbers of
shareholders having limited liability.
They
are also known as joint stock companies
or incorporated companies.
‘Limited
company’ is named so because of Limited liability [In a limited company the shareholders liability
towards the repayment of debts of the firm is limited to the amount
of share in the capital of the company].
A
limited company may be either a private limited company or a public limited
company.
The
fundamental difference is that,
Private limited company is restricted only to private group of people and
they can easily get the control of the company, whereas a
public limited company can issue its shares to the general public and they have
to obtain a certificate of trading before start doing business.
Both
these companies are to be incorporated
(registered) with the ‘Registrar of Companies’ as per the provisions of
Companies Act. “Registrar of companies” is a government authority established to
supervise the affairs of limited companies. The first stage is the
promotion of a company. A promoter is one who usually performs
the primary duties necessary to bring a company into existence and float
it. The primary duties of promoter is to
select type of business, its objectives, prepare the necessary documents
required to be submitted before the ‘Registrar of companies’,
arrangements for raising of initial capital, issue of
prospectus, makes arrangement for allotment of shares etc.
The
incorporation of a public limited
company requires the submission of the following documents to the Registrar
of Companies for approval.
Documents for incorporation of limited companies
The
incorporation of a public limited
company requires the submission of the following documents to the
Registrar of Companies for approval.
(i)
Memorandum of Association
- contain the external relationship of the company . It include the
details of the company like, name objectives, address of registered office
statement of limited liability, amount of share capital etc.
(ii)
Articles of Association – contain
the internal rules and relationship of the company like rights and duties of
directors, procedure of meetings and elections, borrowing powers of company
etc.
(iii)
Statutory declaration - contain
a signed statement of each directors signifying willingness to
serve.
The
‘Registrar of companies’ examines the documents and if satisfied, allows
the company to come into being by issuing a Certificate of incorporation, which establishes the company as a
separate legal body.
Now
a private limited company will now collect money from the shareholders and
start business. But a public limited company, have to issue prospectus Which is a document inviting
the general public to buy the shares of a public limited company. After
collecting the money from the shareholders, they must certify that they have
collected the money for its shares. Then, the ‘Registrar of companies’ will
issue a certificate of
trading so that the company can start business.
More
over at the end of every financial year the public limited companies are bound
to publish their financial report.
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