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- 2 Marks
Question
Section 9 of the Companies Act, 1963 (Act 179) provides that a company limited by shares is “a company having the liability of its members limited to the amount, if any, unpaid on the shares respectively held by them”.
Required:
State and explain TWO (2) advantages that exist for a company limited by shares. (2 marks)
Answer
The advantages include:
- Property: The Company can acquire/own property and dispose of such property as it wishes.
- Contractual relationship: A company on incorporation, has the capacity to enter into contractual relationships with natural or legal persons.
- Suing and being sued: A company may sue natural or legal persons for breach of contractual obligations.
- Perpetual succession: A company will continue in existence despite the death of its members.
- Transferability of shares: The shares of a company can be transferred from a member to another person by sale.
- Legal Personality: On incorporation, a company acquires a legal personality.
- Figurative veil: On incorporation, there is a figurative veil, meaning it protects their officers and staff generally from legal risks.
(2 points at 1 mark for each point = 2 marks)
- Tags: Business Entities, Company Law, Limited Liability
- Level: Level 1
- Topic: Types of capital and the financing of companies
- Series: NOV 2019
- Uploader: Dotse