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CA Foundation · Business Laws · The Companies Act, 2013

Rohan, Sameer and Pooja wish to start a business as a company in which each member's liability is limited to the amount unpaid on shares they hold. They want the company to be able to restrict transfer of shares and to have no more than 200 members. Which kind of company should they register?

They should register a private company limited by shares. Member liability is limited to the unpaid amount on shares, and a private company can restrict share transfer and cap membership at 200. The other forms lack either limited liability on shares or the transfer restriction.

  1. APrivate company limited by sharesCorrect
  2. BCompany limited by guarantee
  3. CUnlimited company
  4. DPublic company limited by shares

Explanation

A company limited by shares restricts member liability to the unpaid amount on shares. A private company restricts share transfer, and the limit on members is 200. A public company does not restrict transfer, a guarantee company limits liability to an agreed sum, and an unlimited company has no limit on liability.

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