Difference between Public Companies Limited by Guarantee and Limited by Shares

Keyword: public company, limited by guarantee, limited by shares, public company constitution

Question

What is the difference between a Public Company Limited by Guarantee and Public Company Limited by Shares?

Answer

NowInfinity now provides separate establishment services for the following two types of Public Companies:

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The two structure types are explained below:

 

Public Company Limited by Guarantee

If a Company is limited by guarantee, the Members' liability is limited to the amount that they have "guaranteed" to pay up, in accordance with the Company's constitution, if the Company is later wound up and its assets are not sufficient to meet its liabilities.

Some of the general characteristics of a Company limited by guarantee are:

  • that they cannot pay dividends (i.e. profits are not distributed to the Company's Members);
  • that they cannot issue shares (and so no person can acquire a controlling interest or profit from selling a share);
  • that each Member of the company has a single vote. 

As such, charities will often utilise this type of Company structure. In saying that, you should seek your own legal advice to determine the kind of structure that would best suit you. 

The Company must comply with all obligations of Public Companies as specified under the Corporations Act 2001 (Cth). Furthermore, a Public Company limited by guarantee must be governed by a constitution and cannot rely solely on replaceable rules. 

 

Public Company Limited by Shares

If a Company is limited by shares, the Members' liability is limited to the amount of unpaid shares that they may hold if the Company is later wound up (noting the concept of "partly paid" and "unpaid" shares). This is the most common business structure type. Both Public and Proprietary Companies can be limited by shares. 

In contrast to a Company limited by guarantee, a Company limited by shares have the following characteristics:

  • profits can be distributed to the Company's Shareholders;
  • shares are issued in the capital of the Company;
  • the Company can issue multiple classes of shares with differing rights relating to voting rights and dividends. 

The Company must comply with all obligations of Public Companies as specified under the Corporations Act 2001 (Cth).

 

 

Disclaimer: You acknowledge and agree that our Services and Materials do not constitute or contain personal or general advice for the purpose of the Corporations Act 2001 (Cth) and that we, our employees and advisers do not offer any legal, accounting, tax or other professional advice or services in connection with the provision of our Services and any Materials.

 

 

 

 

 

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