Unlimited Company
Encyclopedia
An unlimited company or private unlimited company is a hybrid company
incorporated either with or without a share capital (and similar to its limited company
counterpart) but where the liability of the members or shareholders is not limited - that is, its members or shareholders have a joint, several and unlimited obligation to meet any insufficiency in the assets of the company in the event of the company's formal liquidation
. The joint, several and unlimited liability of the members or shareholders of the company to meet any insufficiency in the assets of the company (to settle its outstanding liabilities if any exist) only applies upon the formal liquidation of the company. Therefore, prior to any such formal liquidation of the company, any creditors or security holders of the company may only have recourse to the assets of the company and not to those of its members or shareholders.
Until such event occurs (formal liquidation) - an unlimited company is similar with its counterpart the limited company where its members or shareholders have no direct liability to the creditors or security holders of the company during its normal course of business or existence.
Unlimited companies are found in the United Kingdom
, Ireland
, Hong Kong
, Pakistan
, Nigeria
, India
, Australia
, New Zealand
and other jurisdictions where the company law is derived from English law
. They can also be found in Germany
, France
, Macao
, Czech Republic
and in two jurisdictions in Canada
—Alberta
and Nova Scotia
—where they are called unlimited liability corporation
s. In the United Kingdom they are formed or incorporated by registration under the Companies Act 2006
.
An unlimited company has the benefit and status of incorporation same as its limited company counterpart. Situations where an unlimited company will be preferred to an alternative business model or its limited company counterpart include:
Once formed or incorporated, an unlimited company can in some jurisdictions also re-register and designate itself to limited company status at any time with few formalities, the same also extends to a limited company which may at any time re-register and designate itself to an unlimited company status.
or government registry status. However, a notable example in the United Kingdom was the national subsidiary
of the international retail clothing group C&A
(UK company number 00524665). Other notable examples, amongst others, are the global trading British all-terrain vehicle manufacturer Land Rover
(UK company number 04019301), GlaxoSmithKline
Services Unlimited (UK company number 01047315) part of the GlaxoSmithKline plc., global pharmaceutical group, The Equitable Life Assurance Society (UK company number 00037038), Credit Suisse International
(UK company number 02500199) the United Kingdom investment banking arm of the Credit Suisse Group
and C. Hoare & Co
(UK company number 00240822) England's oldest privately owned bank founded in 1672 by Sir Richard Hoare.
Other notable global trading companies such as Mobil Producing Nigeria Unlimited (a subsidiary of Exxon Mobil
) and Texaco Overseas (Nigeria) Petroleum Company Unlimited (part of the merged Chevron
and Texaco
petroleum conglomerates) exist in Nigeria, amongst others. In the USA, another notable example is the American Express Company
, which once was a publicly traded unlimited liability company, re-incorporating itself to a limited liability company status only in 1965.
In Ireland, local subsidiaries of a number of United States of America companies have registered as unlimited companies to shield their finances from public view. Janssen Pharmaceutical, a subsidiary of its US parent company Johnson & Johnson
re-registered as an unlimited company to avoid the requirement to file annual financial accounts at the Companies Registration Office (CRO) Ireland, thereby effectively also protecting a portion of Johnson & Johnson's financial information. Apple Computer
's Irish division did the same.
exists in the form of a Joint-Stock Company (JSC). This type of joint stock association exists in New York and Texas, among other states. The JSC exists in Texas under the Texas Joint-Stock Company / Revocable Living Trust model, which would present the following differences from a general partnership
:
Despite the fact that shareholders are severably liable for the company's liabilities (as with general partnerships), Texas Joint-Stock Companies have frequently been inappropriately promoted in asset protection
schemes as "alternatives" to limited partnership
s and LLC
s.
Company
A company is a form of business organization. It is an association or collection of individual real persons and/or other companies, who each provide some form of capital. This group has a common purpose or focus and an aim of gaining profits. This collection, group or association of persons can be...
incorporated either with or without a share capital (and similar to its limited company
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...
counterpart) but where the liability of the members or shareholders is not limited - that is, its members or shareholders have a joint, several and unlimited obligation to meet any insufficiency in the assets of the company in the event of the company's formal liquidation
Liquidation
In law, liquidation is the process by which a company is brought to an end, and the assets and property of the company redistributed. Liquidation is also sometimes referred to as winding-up or dissolution, although dissolution technically refers to the last stage of liquidation...
. The joint, several and unlimited liability of the members or shareholders of the company to meet any insufficiency in the assets of the company (to settle its outstanding liabilities if any exist) only applies upon the formal liquidation of the company. Therefore, prior to any such formal liquidation of the company, any creditors or security holders of the company may only have recourse to the assets of the company and not to those of its members or shareholders.
Until such event occurs (formal liquidation) - an unlimited company is similar with its counterpart the limited company where its members or shareholders have no direct liability to the creditors or security holders of the company during its normal course of business or existence.
Unlimited companies are found in the United Kingdom
United Kingdom
The United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages...
, Ireland
Ireland
Ireland is an island to the northwest of continental Europe. It is the third-largest island in Europe and the twentieth-largest island on Earth...
, Hong Kong
Hong Kong
Hong Kong is one of two Special Administrative Regions of the People's Republic of China , the other being Macau. A city-state situated on China's south coast and enclosed by the Pearl River Delta and South China Sea, it is renowned for its expansive skyline and deep natural harbour...
, Pakistan
Pakistan
Pakistan , officially the Islamic Republic of Pakistan is a sovereign state in South Asia. It has a coastline along the Arabian Sea and the Gulf of Oman in the south and is bordered by Afghanistan and Iran in the west, India in the east and China in the far northeast. In the north, Tajikistan...
, Nigeria
Nigeria
Nigeria , officially the Federal Republic of Nigeria, is a federal constitutional republic comprising 36 states and its Federal Capital Territory, Abuja. The country is located in West Africa and shares land borders with the Republic of Benin in the west, Chad and Cameroon in the east, and Niger in...
, India
India
India , officially the Republic of India , is a country in South Asia. It is the seventh-largest country by geographical area, the second-most populous country with over 1.2 billion people, and the most populous democracy in the world...
, Australia
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...
, New Zealand
New Zealand
New Zealand is an island country in the south-western Pacific Ocean comprising two main landmasses and numerous smaller islands. The country is situated some east of Australia across the Tasman Sea, and roughly south of the Pacific island nations of New Caledonia, Fiji, and Tonga...
and other jurisdictions where the company law is derived from English law
English law
English law is the legal system of England and Wales, and is the basis of common law legal systems used in most Commonwealth countries and the United States except Louisiana...
. They can also be found in Germany
Germany
Germany , officially the Federal Republic of Germany , is a federal parliamentary republic in Europe. The country consists of 16 states while the capital and largest city is Berlin. Germany covers an area of 357,021 km2 and has a largely temperate seasonal climate...
, France
France
The French Republic , The French Republic , The French Republic , (commonly known as France , is a unitary semi-presidential republic in Western Europe with several overseas territories and islands located on other continents and in the Indian, Pacific, and Atlantic oceans. Metropolitan France...
, Macao
Mação
Mação is a municipality in Portugal with a total area of 400.0 km² and a total population of 7,763 inhabitants.The municipality is composed of eight parishes, and is located in the Santarém District....
, Czech Republic
Czech Republic
The Czech Republic is a landlocked country in Central Europe. The country is bordered by Poland to the northeast, Slovakia to the east, Austria to the south, and Germany to the west and northwest....
and in two jurisdictions in Canada
Canada
Canada is a North American country consisting of ten provinces and three territories. Located in the northern part of the continent, it extends from the Atlantic Ocean in the east to the Pacific Ocean in the west, and northward into the Arctic Ocean...
—Alberta
Alberta
Alberta is a province of Canada. It had an estimated population of 3.7 million in 2010 making it the most populous of Canada's three prairie provinces...
and Nova Scotia
Nova Scotia
Nova Scotia is one of Canada's three Maritime provinces and is the most populous province in Atlantic Canada. The name of the province is Latin for "New Scotland," but "Nova Scotia" is the recognized, English-language name of the province. The provincial capital is Halifax. Nova Scotia is the...
—where they are called unlimited liability corporation
Unlimited liability corporation
Unlimited Liability Corporations exist in three of Canada's 10 provinces - Alberta , Nova Scotia , and British Columbia....
s. In the United Kingdom they are formed or incorporated by registration under the Companies Act 2006
Companies Act 2006
The Companies Act 2006 is an Act of the Parliament of the United Kingdom which forms the primary source of UK company law. It had the distinction of being the longest in British Parliamentary history: with 1,300 sections and covering nearly 700 pages, and containing 16 schedules but it has since...
.
An unlimited company has the benefit and status of incorporation same as its limited company counterpart. Situations where an unlimited company will be preferred to an alternative business model or its limited company counterpart include:
- secrecy concerning financial affairs is desired, effectively shielding and protecting its financial affairs from its competitors and making them non-public information including shareholder dividend payments: a United Kingdom unlimited company, unlike its limited company counterpart, is generally not required to publish or make public its company financial statementsFinancial statementsA financial statement is a formal record of the financial activities of a business, person, or other entity. In British English—including United Kingdom company law—a financial statement is often referred to as an account, although the term financial statement is also used, particularly by...
(file its annual financial accounts at Companies HouseCompanies HouseCompanies House is the United Kingdom Registrar of Companies and is an Executive Agency of the United Kingdom Government Department for Business, Innovation and Skills . All forms of companies are incorporated and registered with Companies House and file specific details as required by the...
). - the company is trading in an area where limited liability is not acceptable, vital or practical.
- extending, in general, a greater assurance and confidence to creditors - in contrast to its limited company counterpart.
- there is a low risk of insolvency.
- the company or its trading activities has or generates sufficient capital, funds or financing without need to approach general lenders such as high-street retail banks.
- developing more advantageous company and business capital strategies in an ever increasing irreversible trend of bank disintermediationDisintermediationIn economics, disintermediation is the removal of intermediaries in a supply chain: "cutting out the middleman". Instead of going through traditional distribution channels, which had some type of intermediate , companies may now deal with every customer directly, for example via the Internet...
by companies and their management. - a focused higher standard of board of directorsBoard of directorsA board of directors is a body of elected or appointed members who jointly oversee the activities of a company or organization. Other names include board of governors, board of managers, board of regents, board of trustees, and board of visitors...
and executive managementSenior managementSenior management, executive management, or management team is generally a team of individuals at the highest level of organizational management who have the day-to-day responsibilities of managing a company or corporation, they hold specific executive powers conferred onto them with and by...
behaviour (or probity) and business modelBusiness modelA business model describes the rationale of how an organization creates, delivers, and captures value...
for risk managementRisk managementRisk management is the identification, assessment, and prioritization of risks followed by coordinated and economical application of resources to minimize, monitor, and control the probability and/or impact of unfortunate events or to maximize the realization of opportunities...
. - a flow-through entityFlow-through entityA flow-through entity is a legal entity where income "flows through" to investors or owners; that is, the income of the entity is treated as the income of the investors or owners. Flow-through entities are also known as pass-through entities or fiscally-transparent entities...
is required for United States federal tax purposes, under the entity classification rules.
Once formed or incorporated, an unlimited company can in some jurisdictions also re-register and designate itself to limited company status at any time with few formalities, the same also extends to a limited company which may at any time re-register and designate itself to an unlimited company status.
Notable unlimited companies
The unlimited company is a not too common or perhaps well known or promoted form of company incorporation (due to the narrow focus of generic company formation registration agents) and is not always required under company law to add or state the word Unlimited or its abbreviations (Unltd., or Ultd.) at the ending of its legal company name, making it not easily recognizable, without first reviewing its certificate of incorporationCertificate of incorporation
A certificate of incorporation is a legal document relating to the formation of a company or corporation. It is a license to form a corporation issued by state government. Its precise meaning depends upon the legal system in which it is used, but the two primary meanings are:* In the U.S.A...
or government registry status. However, a notable example in the United Kingdom was the national subsidiary
Subsidiary
A subsidiary company, subsidiary, or daughter company is a company that is completely or partly owned and wholly controlled by another company that owns more than half of the subsidiary's stock. The subsidiary can be a company, corporation, or limited liability company. In some cases it is a...
of the international retail clothing group C&A
C&A
C&A is an international chain of fashion retail clothing stores, with its European head offices in Vilvoorde , Belgium and Düsseldorf, Germany...
(UK company number 00524665). Other notable examples, amongst others, are the global trading British all-terrain vehicle manufacturer Land Rover
Land Rover
Land Rover is a British car manufacturer with its headquarters in Gaydon, Warwickshire, United Kingdom which specialises in four-wheel-drive vehicles. It is owned by the Indian company Tata Motors, forming part of their Jaguar Land Rover group...
(UK company number 04019301), GlaxoSmithKline
GlaxoSmithKline
GlaxoSmithKline plc is a global pharmaceutical, biologics, vaccines and consumer healthcare company headquartered in London, United Kingdom...
Services Unlimited (UK company number 01047315) part of the GlaxoSmithKline plc., global pharmaceutical group, The Equitable Life Assurance Society (UK company number 00037038), Credit Suisse International
Credit Suisse
The Credit Suisse Group AG is a Swiss multinational financial services company headquartered in Zurich, with more than 250 branches in Switzerland and operations in more than 50 countries.-History:...
(UK company number 02500199) the United Kingdom investment banking arm of the Credit Suisse Group
Credit Suisse
The Credit Suisse Group AG is a Swiss multinational financial services company headquartered in Zurich, with more than 250 branches in Switzerland and operations in more than 50 countries.-History:...
and C. Hoare & Co
C. Hoare & Co
C. Hoare & Co. is England's oldest privately owned banking house. Founded in 1672 by Sir Richard Hoare, C. Hoare & Co. remains family owned and is currently managed by the 11th generation of Hoare's direct descendants....
(UK company number 00240822) England's oldest privately owned bank founded in 1672 by Sir Richard Hoare.
Other notable global trading companies such as Mobil Producing Nigeria Unlimited (a subsidiary of Exxon Mobil
ExxonMobil
Exxon Mobil Corporation or ExxonMobil, is an American multinational oil and gas corporation. It is a direct descendant of John D. Rockefeller's Standard Oil company, and was formed on November 30, 1999, by the merger of Exxon and Mobil. Its headquarters are in Irving, Texas...
) and Texaco Overseas (Nigeria) Petroleum Company Unlimited (part of the merged Chevron
Chevron Corporation
Chevron Corporation is an American multinational energy corporation headquartered in San Ramon, California, United States and active in more than 180 countries. It is engaged in every aspect of the oil, gas, and geothermal energy industries, including exploration and production; refining,...
and Texaco
Texaco
Texaco is the name of an American oil retail brand. Its flagship product is its fuel "Texaco with Techron". It also owns the Havoline motor oil brand....
petroleum conglomerates) exist in Nigeria, amongst others. In the USA, another notable example is the American Express Company
American Express
American Express Company or AmEx, is an American multinational financial services corporation headquartered in Three World Financial Center, Manhattan, New York City, New York, United States. Founded in 1850, it is one of the 30 components of the Dow Jones Industrial Average. The company is best...
, which once was a publicly traded unlimited liability company, re-incorporating itself to a limited liability company status only in 1965.
In Ireland, local subsidiaries of a number of United States of America companies have registered as unlimited companies to shield their finances from public view. Janssen Pharmaceutical, a subsidiary of its US parent company Johnson & Johnson
Johnson & Johnson
Johnson & Johnson is an American multinational pharmaceutical, medical devices and consumer packaged goods manufacturer founded in 1886. Its common stock is a component of the Dow Jones Industrial Average and the company is listed among the Fortune 500....
re-registered as an unlimited company to avoid the requirement to file annual financial accounts at the Companies Registration Office (CRO) Ireland, thereby effectively also protecting a portion of Johnson & Johnson's financial information. Apple Computer
Apple Computer
Apple Inc. is an American multinational corporation that designs and markets consumer electronics, computer software, and personal computers. The company's best-known hardware products include the Macintosh line of computers, the iPod, the iPhone and the iPad...
's Irish division did the same.
United States
In the United States, a similar unlimited entityEntity
An entity is something that has a distinct, separate existence, although it need not be a material existence. In particular, abstractions and legal fictions are usually regarded as entities. In general, there is also no presumption that an entity is animate.An entity could be viewed as a set...
exists in the form of a Joint-Stock Company (JSC). This type of joint stock association exists in New York and Texas, among other states. The JSC exists in Texas under the Texas Joint-Stock Company / Revocable Living Trust model, which would present the following differences from a general partnership
General partnership
In the commercial and legal parlance of most countries, a general partnership or simply a partnership, refers to an association of persons or an unincorporated company with the following major features:...
:
- Has all the corporate characteristics, except limited liability of shareholders.
- Formed by private contract creating a separate entity.
- Recognized by a specific Texas State Statute, but not regulated by the Uniform Partnership Act.
- A shareholder cannot bind other shareholder concerning liability, etc.
Despite the fact that shareholders are severably liable for the company's liabilities (as with general partnerships), Texas Joint-Stock Companies have frequently been inappropriately promoted in asset protection
Asset protection
Asset protection is a set of legal techniques and a body of statutory and common law dealing with protecting assets of individuals and business entities from civil money judgments...
schemes as "alternatives" to limited partnership
Limited partnership
A limited partnership is a form of partnership similar to a general partnership, except that in addition to one or more general partners , there are one or more limited partners . It is a partnership in which only one partner is required to be a general partner.The GPs are, in all major respects,...
s and LLC
Limited liability company
A limited liability company is a flexible form of enterprise that blends elements of partnership and corporate structures. It is a legal form of company that provides limited liability to its owners in the vast majority of United States jurisdictions...
s.