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

Greenfield Ltd is a private company limited by shares. Its articles restrict the transfer of shares and prohibit any offer of its shares to the public. Which statement correctly describes the effect of these features?

Greenfield Ltd is a private company: it cannot offer shares to the public, but it still has separate legal personality and limited liability. Restrictions on share transfer are a common feature of private companies and do not affect their status as a distinct legal person created by incorporation.

  1. AGreenfield Ltd cannot be a separate legal person, as its shares cannot be freely traded
  2. BGreenfield Ltd is a private company, so it cannot offer its shares to the public but still has separate legal personalityCorrect
  3. CGreenfield Ltd must convert into a partnership, because private companies cannot limit liability

Explanation

Private companies are typically restricted from offering shares to the public and may restrict transfers, yet they are still incorporated bodies with separate personality and limited liability. Share transferability has no bearing on personality, so the first option is wrong. The third is plainly incorrect.

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