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ACCA Applied Skills · Corporate and Business Law (Global) · Corporations and legal personality

Delmar Ltd is a private company limited by shares. Its directors wish to raise capital quickly by inviting the general public to subscribe for its shares through an advertised offer. Which statement is correct?

A private company cannot offer its shares to the public. To make an advertised public offer, Delmar Ltd must first re-register as a public company. Advertising the offer does not remove the restriction, and members' liability status has no bearing on the right to make public offers.

  1. AA private company is generally prohibited from offering its shares to the public, so it would first need to re-register as a public companyCorrect
  2. BA private company may offer shares to the public provided the offer is advertised in a national newspaper
  3. CA private company may offer shares to the public only if all members have unlimited liability

Explanation

The key distinction between public and private companies is that only a public company may offer its shares or debentures to the public. A private company that wishes to do so must first re-register as a public company. Advertising does not remove the prohibition, and unlimited liability is irrelevant to the right to make a public offer.

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