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What Is a Company Limited by Shares and by Guarantee?

Posted by M. Margaret Gonsalves-Sabola | Jul 06, 2018 | 0 Comments

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The Bahamas' Companies Act and International Business Companies Act, 2000 allow for the incorporation of four different types of companies. These include a company limited by shares, a company limited by guarantee, a company limited by shares and by guarantee, and a company with unlimited liability.

What do “limited by shares” and “limited by guarantee” mean? These terms refer to limitations on liability for members of a company. For a company limited by shares, members' liability is limited to the amount unpaid on the shares that member holds in the company. If the company defaults on obligations or is wound up, each shareholder would not be responsible for the entire amount of the obligation or all of the company's debts. For a company limited by guarantee, the same concept applies: members' liability is limited to a specific amount each member agrees to contribute to the assets of the company if it is wound up.

A company limited by shares and by guarantee combines these two concepts. Members' liability is limited both by the amount unpaid on the shares the member holds and by a specific amount. The company's memorandum of association must include both of the following: (1) a statement of the authorised capital of the company setting forth the total par value of shares that the company can issue and the amount represented by shares without par value that the company can issue; and (2) a statement that each member of the company undertakes to contribute to the company's assets in the event of a winding up while he is a member or for one year afterwards. Companies Act, Sections 5, 7 and 8; International Business Companies Act, 2000, Section 13.

In practice, members of a company limited by shares and by guarantee can be liable both as to the amount of shares they hold and as to winding up, or they can be liable as to winding up only if they are not issued shares. This should be specified in the memorandum of association. A company of this type can be useful if there are some members who only hold a few shares or if the company operates in a high-risk industry and may need to pay substantial debts or wind up at some point.

To find out more about the Companies Act and the International Business Companies, visit Gonsalves-Sabola Chambers online or call the office at +1 242 326 6400.

About the Author

M. Margaret Gonsalves-Sabola

M. Margaret Gonsalves-Sabola is a civil and commercial litigation attorney and an accredited civil and commercial mediator. Margaret has over 21 years' experience in legal practice in the United Kingdom, Jamaica and The Bahamas.

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