Nov 2019 Q1 b.
Kofi Stone, Ama Black and Adwoa Sika who were your students at the Ultimate Business School have decided to venture into business after their National Service which ends in the next three months. They have approached you for your advice on the type(s) of business (es) which they should invest in, considering the country’s economic environment.
Required:
Explain TWO (2) characteristics of a Private Limited Liability Company. (4 marks)
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Number of Shareholders
- The law limits the number of shareholders of a private limited liability company to fifty (50). If at any time the number of shareholders exceed this number, the company and those shareholders who will be aware of this fact will be liable to a fine.
Raising of Capital - Capital for setting up and running the business is raised through the contributions of members. The company is not permitted by law to request the general public to subscribe for shares and thereby contribute to its capital.
Transfer of Shares - Shares in a private limited company cannot be traded on the stock exchange. If a shareholder in a private limited company desires to transfer his shares, he can only do so with the consent of other shareholders, which is very rare.
Directors as Shareholders - In most cases, the directors of a private limited company hold a substantial portion of the company’s shares, as opposed to directors of a public limited company who may not be shareholders.