IAI Actuarial Core Principles · Business Management · Separate legal personality, directors' duties, shareholders and partnerships
Three friends in Pune plan to start a consulting business and want the business to be a separate legal person whose members' liability is limited to the amount unpaid on their shares. They want to keep the business private, with no public offer of shares. Which form of entity under the Companies Act, 2013 best fits this aim?
A private company limited by shares fits best. It is a separate legal person, cannot invite the public to subscribe for its shares, and its members are liable only for any unpaid amount on their shares. The other forms either lack separate personality or lack limited liability.
- AA private company limited by sharesCorrect
- BA company limited by guarantee with no share capital
- CAn unlimited company
- DA partnership firm registered under the Indian Partnership Act, 1932
- A sole proprietorship
Explanation
A private company limited by shares is a separate legal person, restricts share transfer and bars public invitation to subscribe, and limits members to the unpaid amount on shares. A guarantee company has no share capital. An unlimited company gives no liability limit. A partnership firm is not a separate legal person.
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