Question: What is a Company Limited by Shares?
Answer:A company limited by shares is one of the most common types of business structures in Australia. Both public and proprietary companies can be limited by shares. If your company is a proprietary company (i.e. a private company), then it will be limited by shares.
Types of Shares
When incorporating a company limited by shares, the total share capital consists of all of the shares held by each member at incorporation. Those shares can either be:
- fully paid;
- partly paid; or
- unpaid.
Partly paid or unpaid shares are shares where a member is due to pay the company. In contrast, fully paid shares are where the full value of the shares have been paid to the company.
In companies limited by shares, the liability of members is limited to any unpaid amount of shares that they hold. If a member has fully paid for their shares, they should have no further liabilities as a member.
In most cases, members will have fully paid for the shares at the time of issuing the shares. Consequently, they have no additional liability to the company. Similarly, a director of a company that is limited by shares, will not be personally liable for any of the company’s debts, unless they are in breach of their director duties.
