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15.What are different types of liabilities in relation to Company in Australia?
Companies in Australia can be classified according to member’s liability.
1. Companies limited by shares
In Companies limited by shares, shareholders liability is limited to any unpaid amount on their shares. In other words, the company has shareholders, and that the liability of the shareholders to the company is limited to the capital originally invested, i.e. the nominal value of the shares and any premium paid in return for the issue of the shares by the company. A shareholder's personal assets are thereby protected in the event of the company's insolvency, but money invested in the company will be lost.
2. Companies limited by guarantee
Companies limited by guarantee do not have share capital like companies limited by shares. Usually, non-profit companies and charities are companies limited by guarantee.
In such companies, the members place a guarantee on the company which may only be enforced on the winding up of the company and is not an asset of the company which may be charged during its life.
3. Unlimited liability companies
The unlimited liability company is used mainly by professional organisations carried on in a partnership eg. Legal firms or Accounting firms.
The Corporations Act defines Unlimited liability companies as a company whose members have no limit placed on their individual liability to contribute to the debts of the company.
The Sole advantage of such company is that this company is exempt from the prohibition on reduction of capital (s258A) which means money can be more freely taken out of the company’s capital base.
4. No liability companies
No liability companies are exclusively used for mining and resource companies. s112(2) of Corporations Act says constitution must state that the sole object is mining purposes. The sole reason for such structure is that the mining is seen as particularly risky business and people were reluctant to invest. Shares are part paid with the option of paying the remainder later.
In Australia, companies may only be registered as no liability where :
a) the company has share capital,
b) the company’s constitution states that its sole objects are mining purposes and,
c) the company has no contractual right under its constitution to recover calls made on its shares from a shareholder who fails to pay them s112(2).
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