No liability
Encyclopedia
A no-liability company in Australia
(suffix NL) is a company which, under the Corporations Act 2001 (Cth), must have as its stated objects that it is solely a mining
company and that it is not entitled to calls on the unpaid issue price of shares. It is a company which is restricted to mining activities and is the only sort of corporation which is entitled to this form of liability, given the sometimes financially risky business of mining. Most of the usual rules in the Act apply to no-liability companies, save that a mining company must adopt a constitution
which states their objects as mining.
No-liability companies should not be confused with the concept of limited liability
.
No-liability companies are differentiated from other companies as their shareholders are not liable to pay calls on unpaid shares. This differs from traditional company structure where the purchase of shares is a binding contract. Should the shareholder chose not to pay when there is a call, the shareholder forfeits both the unpaid and paid shares. This encourages investment in potentially risky mining ventures, as a shareholder with unpaid shares can chose to withdraw from the company with no legal consequences. A successful mining company usually converts to a limited liability company when advantageous.
Australia
Australia , officially the Commonwealth of Australia, is a country in the Southern Hemisphere comprising the mainland of the Australian continent, the island of Tasmania, and numerous smaller islands in the Indian and Pacific Oceans. It is the world's sixth-largest country by total area...
(suffix NL) is a company which, under the Corporations Act 2001 (Cth), must have as its stated objects that it is solely a mining
Mining
Mining is the extraction of valuable minerals or other geological materials from the earth, from an ore body, vein or seam. The term also includes the removal of soil. Materials recovered by mining include base metals, precious metals, iron, uranium, coal, diamonds, limestone, oil shale, rock...
company and that it is not entitled to calls on the unpaid issue price of shares. It is a company which is restricted to mining activities and is the only sort of corporation which is entitled to this form of liability, given the sometimes financially risky business of mining. Most of the usual rules in the Act apply to no-liability companies, save that a mining company must adopt a constitution
Constitution
A constitution is a set of fundamental principles or established precedents according to which a state or other organization is governed. These rules together make up, i.e. constitute, what the entity is...
which states their objects as mining.
No-liability companies should not be confused with the concept of limited liability
Limited liability
Limited liability is a concept where by a person's financial liability is limited to a fixed sum, most commonly the value of a person's investment in a company or partnership with limited liability. If a company with limited liability is sued, then the plaintiffs are suing the company, not its...
.
No-liability companies are differentiated from other companies as their shareholders are not liable to pay calls on unpaid shares. This differs from traditional company structure where the purchase of shares is a binding contract. Should the shareholder chose not to pay when there is a call, the shareholder forfeits both the unpaid and paid shares. This encourages investment in potentially risky mining ventures, as a shareholder with unpaid shares can chose to withdraw from the company with no legal consequences. A successful mining company usually converts to a limited liability company when advantageous.