Private companies

That's a big question - do I not cover this in lectures? The members of a private company may have limited liability. It is possible that they do not have a limitation on the extent of their liability in the event of the company entering into an insolvent liquidation where the company is formed as an Unlimited Liability Company ... but that's not what your post is about So, if the private company is not formed as an Unlimited Liability Company, then it's a Limited Liability Company meaning that, in the event of an insolvent liquidation, the members are protected from having to make good the shortfall difference between the realised value of the company's assets and the debt outstanding to the company's creditors. Hence the expression of a LIMITED LIABILITY company Normally, the liability of the members of a company is limited to the amount as yet unpaid on the capital value of shares held by the members. That would be true for approximately 99.95% of all companies But, occasionally, it's possible that the liability for the members is limited not 'by the amount as yet unpaid on shares held by them' but instead by the amount that each separate member has guaranteed that the member will contribute to the company's shortfall in the event of an insolvent liquidation Most unusual. But possible. In my own experience the Summerseat Players Company Limited (a company of amateur dramatic enthusiasts based in the north end of Bury about 20 kilometers north of Manchester) is one such company Does that answer you?

Yes, I understand. Why would anyone choose to form a company limited by guarantee rather than limited by shares?

Another good question. As the numbers (that I 'quote') show, there aren't that many companies that are limited by guarantee As to why anyone might wish to be involved in such a company ... good question I was involved in a professional capacity in the formation of Summerseat Players Limited. This is a company limited by guarantee and having charitable status. The members of this company formed for the purposes of promoting the dramatic arts asked me to form a company where liability was limited by the separate amounts that each member wished to guarantee in the event of an insolvent liquidation So that's what I did But they could have achieved the same result by having a company limited by shares. It's just that they chose the guarantee route OK?

Okay, thank you

You're welcome