Public limited "limited by shares vs limited by guarantee

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Querist : Anonymous

Querist : Anonymous (Querist)

11 January 2012 Hi, members

I want to know what is the main diffrence between Public Limited Company LIMITED BY GUARANTEE vs. PUBLIC LIMITED COMPANY LIMITED BY SHARES.

WHAT ARE THE PREVALGES AND EXEMPTION

PLEASE CONSIDER IT AND GIVE YOUR VIEWS

THANKS AND REGARDS !!

CS Mitesh Mehta

CS Mitesh Mehta (Expert)
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30 January 2012 A guarantee company is a company having the liability of its members limited by its memorandum of association to such an amount as the members may thereby undertake to contribute to the assets of the company in the event of its being wound up. Guarantee companeis are of two types, viz., guarantee company not having share capial and guarantee company having share capital.

Guarantee company not having share capital – A guaranatee company not having share capital does not obtains initial and working funds from its members, but from some other sources, such as grants, endowments, fees, subscriptions, etc. Institutions started by Government grants or donations from the public can be run by such companies.
Guarantee company having share capital – Where initial working capital is not available through grants, etc., but once the company is set in motion, the normal working funds would be available through fees, subscriptions, charges, etc., received from the services rendered, a guarantee company having share capital may be formed.

In terms of section 3(1)(iv) of the Companies Act, 1956 a public company means a company which is not a private company and has a minimum paid-up capital of five lakh rupees or such higher paid-up capital as may be prescribed. A private company which is subsidiary of a public company is also a public company.

At least 7 persons are required to form a public company.
A prospectus or a statement in lieu thereof has to be filed with the Registrar of Companies before allotment of shares.
It has to obtain Certificate of Commencement of Business from the Registrar of Companies before it can commence business on incorporation.
It has to hold a statutory meeting of members and file a Statutory Report with the Registrar of Companies.
Any member of the public who is willing to pay the price may acquire its shares or debentures.
Its shares are easily transferable and since these can be quoted on a recognised stock exchange, their liquidity is enhanced.
It can have any number of members and it is easy for it to raise capital through public subscriptions.
It can obtain loans from financial instituations and banks.
It shall have at least three Directors.

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