Classification of Companies in Kenya

Classification of Companies

The Companies Act requires that all businesses be registered. After the business is registered, the registrar must issue a certificate of incorporation. Companies may be formed in a variety of ways depending on the jurisdiction. The following are some of the most prevalent business types:

Private company

If a firm’s stockholders are unable to transfer their shares, it is referred to be a private company.
If share transfers are permitted, the corporation restricts membership to 50 people and does not issue invitations to the general public to subscribe for shares.
These businesses have minimal obligations for their stockholders, but they also have some ownership limitations.
A private corporation might have as few as two members and as many as fifty, excluding staff and stockholders.

A private corporation is preferable in situations when it is designed to benefit from corporate life, has limited liability, and the firm is controlled by a small number of people.
An individual can obtain control of an entire commercial enterprise in the private sector.

Public company

  • At least seven members are needed to form a public company.
  • The maximum number of members remains unrestricted in the case of public companies.
  • A Prospectus is issued by the public companies to invite people to buy the shares of the company.
  • The liability of the members is limited by the value of the shares they purchase.
  • The shares of a public company are sold and bought freely without any obstruction in the stock market.

Companies limited by a Guarantee

In the case of the company’s collapse, each of its members undertakes to pay a certain sum of money.
This sum is referred to as a guarantee.
There is no obligation to pay more than the share’s value and the guarantee. Charities, community initiatives, clubs, societies, and other organizations are some of the significant outcomes of firms limited by guarantee.
The majority of these businesses are not profitable.
These businesses can be classified as private firms with limited liability for their owners.
A guarantee business replaces share capital with guarantors who agree to pay a guarantee sum if the firm is liquidated.

Companies limited by  Share

In a company limited by shares, the shareholders contribute a nominal amount of money to the share capital. Payments can be made entirely at once or in installments.
Members are not required to pay anything more than the share’s fixed value. Among the registered businesses, firms limited by shares are the most common.
The suffix ‘Restricted’ is necessary at the end of the names of these corporations so that the public is aware that the members’ responsibility is limited.

Unlimited company

In the context of partnership businesses, limitless corporations are those in which the shareholders’ obligations are infinite.
The Companies Act allows for such businesses, although they aren’t well-known.
These sorts of businesses can be formed with or without a share capital.
Should the business go into formal liquidation and there is a requirement to meet the inadequacy of assets to pay the obligations and liabilities, as well as the fixed cost of liquidation, the shareholders are obligated to give whatever sums are necessary to satisfy the firm’s existing debts.
An unlimited company’s members or shareholders have no direct accountability to its creditors or security holders.

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