(a)Give six features of a public company (b)Explain four reasons for winding up a public limited company

Answer Details

(a) Features of a public company

(i) It has a separate legal status from its members; therefore, it can sue and be sued in its own name.

(ii) The liability of its shareholders is limited to the amount unpaid on their shares.

(iii) It can invite the general public to subscribe for its shares and debentures.

(iv) Its shares are freely transferable, usually through the stock exchange.

(v) It may issue debentures, which may be secured on the assets of the company.

(vi) It must file and publish its annual reports and audited accounts as required by law.

(vii) It must have a minimum of seven members, while there is no maximum limit to the number of shareholders.

(viii) It must obtain a trading certificate before it can commence business.

(b) Reasons for winding up a public limited company

(i) The shareholders may pass a resolution for voluntary winding up where the company can no longer pay its debts, is no longer profitable, or the purpose for which it was formed has been achieved.

(ii) A court may order the winding up of the company where it is unable to pay its debts or honour its financial obligations.

(iii) The company may be wound up if it was formed for illegal purposes or if its objects have become unlawful or impossible to achieve.

(iv) The Corporate Affairs Commission may strike the company’s name off the register where it fails to comply with legal requirements.

(v) The company may be wound up if it does not commence business within the period prescribed by law after incorporation.

(vi) Winding up may occur where the number of members falls below the statutory minimum of seven.