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

Tolan Ltd, a private company, wants to raise capital by inviting the general public to subscribe for its shares. Which course of action is correct?

Tolan Ltd must first re-register as a public company. Only public companies may offer shares to the public, and a private company cannot get around the restriction by keeping its name or by obtaining member consent.

  1. AIt may do so, as long as it keeps the word Limited in its name
  2. BIt must first re-register as a public company, as a private company cannot offer its shares to the publicCorrect
  3. CIt may do so, provided all members consent in writing

Explanation

A key distinction between company types is that only a public company may offer its shares or debentures to the public. A private company wishing to do so must first re-register as public. Keeping the name or obtaining member consent does not remove the prohibition.

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