that debt only to a certain limit and not beyond it. In thecontext of company law liability may be limited either byshares or by guarantee.Under Section (2) (a) of the Companies Act, in a companylimited by shares the members liability to contribute to thecompanies assets is limited to the amount if any paid on theirshares.Under Section 4 (2) (b) of the Companies Act in a companylimited by guarantee the members undertake to contribute acertain amount to the assets of the company in the event of the company being wound up. Note that it is the members’liability and not the companies’ liability which is limited. Aslong as there are adequate assets, the company is liable topay all its debts without any limitation of liability. If theassets are not adequate, then the company can only bewound up as a human being who fails to pay his debts. Notethat in England the Insolvency Act has consolidated therelationships relating to …. That does not apply here.Nearly all statutory rules in the Companies Act are intendedfor one or two objects namely1.The protection of the company’s creditors;2.The protection of the investors in this instancebeing the members. These underlie the very foundation of company law.
FORMATION OF A LIMITED COMPANY
First in relation to registration under the Companies ActIn order to incorporate themselves into a company, thosepeople wishing to trade through the medium of a limitedliability company must first prepare and register certaindocuments. These are as follows
Memorandum of Association
: this is thedocument in which they express inter alia theirdesire to be formed into a company with a specificname and objects. The Memorandum of Association of a company is its primary documentwhich sets up its constitution and objects;
Articles of Association
; whereas thememorandum of association of a company setsout its objectives and constitution the articles of association contain the rules and regulations bywhich its internal affairs are governed dealing withsuch matters as shares, share capital, company’smeetings and directors among others;Both the Memorandum and Articles of Associations musteach be signed by seven persons in the case of a publiccompany or two persons if it is intended to form a privatecompany. These signatures must be attested by awitness. If the company has a share capital eachsubscriber to the share capital must write opposite hisname the number of shares he takes and he must nottake less than one share.
Statement of Nominal Capital
– this is onlyrequired if the company has a share capital. Thefees that one pays on registration will bedetermined by the share capital that the companyhas stated.
Declaration of Compliance
: this is a statutorydeclaration made either by the advocates engagedin the formation of the company or by the personnamed in the articles as the director or secretaryto the effect that all the requirements of thecompanies Act have been complied with where itis intended to register a public company, Section184 (4) of the Companies Act also requires the