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

Which of the following is a key difference between a private company limited by shares and a public company limited by shares in most jurisdictions following the common-law company model?

A public company may offer its shares to the public, while a private company is generally prohibited from doing so. Both types give members limited liability. The restriction on public offers is the standard distinguishing feature of a private company under the common-law company model.

  1. AA private company has no limited liability for its members, whereas a public company does
  2. BA public company may offer its shares to the public, whereas a private company is generally prohibited from doing soCorrect
  3. CA public company must have only one director, whereas a private company must have at least two

Explanation

Both types give members limited liability, so the first option is wrong. The characteristic distinction is that a public company may offer its shares or securities to the public while a private company generally cannot. Director numbers are not reversed as the third option claims; public companies usually need at least as many.

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