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

Marta and Jonas run a trading business and want the owners' personal assets to be protected if the business cannot pay its debts, while keeping the shares out of public offer. They incorporate a company limited by shares and restrict transfer of shares in its constitution. Which statement best describes the effect of this choice?

The company is a private company limited by shares. Members are liable only for any amount unpaid on their shares, so their personal assets are protected, and restricting transfers and avoiding public offers keeps it private rather than public or unlimited.

  1. AThe company is a private company limited by shares, and members' liability is limited to any unpaid amount on their sharesCorrect
  2. BThe company is a public company, so members' liability is limited to the market value of their shares
  3. CThe company is an unlimited company, so members are liable only up to the amount of their original investment
  4. DThe company is a private company, so its directors alone are liable for its debts

Explanation

A company limited by shares limits each member's liability to any amount unpaid on the shares held. Restricting share transfers and not offering shares to the public indicates a private company. The unlimited option is wrong because unlimited members have no cap on liability.

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