The structure of Limited Liability Companies.
The owners of a Limited Liability Company are known as shareholders. There are many shareholders in this type of company. Shareholders will elect the directors to run the business. It is possible for directors to be shareholders of the company. Shareholders will not be personally responsible for any losses the company may endure. It is treated as a completely separate entity. The shareholders liability will be limited to the original price the person pays for the share, e.g. If an individual pays one euro for their share the maximum that shareholder can lose is one euro. The share capital has to stay within the company. Shareholders may not withdraw his share capital until the company is wound up. The Names and address of all directors and their shareholdings have to be registered. The Memorandum and Articles of Association must also be registered.
Continuous Obligations
All directors are accountable for anything that happens in the company. The directors are required to send in an Annual Return this will state any changes in particulars connected with the directors, the registered office and the Memorandum and Articles. It details any shares or mortgages taken out by the company. In other words it’s a file of detailed information about what is going on in the company throughout the year financially. It is the director’s duty to make sure all information is accurate. Large companies (Limited Liabilility Companies) have to send in all their accounts. Medium companies (partnerships) have to send in less and small companies (sole traders) have to send in less again. If the annual turnover of the business is €7.3 million they must have their accounting systems and records inspected by an external auditor.
Share Capital
This is where the original shares made by the shareholders are the book value of their investment. Selling addition shares will increase cash. Companies can sometimes use some to buy back shares. (Financial Management, An Irish Text, by Thomas Power, Stephen Walsh and Paul O Meara.) A private limited company can be formed by one or more people (promoters). There must be two directors one who will be the promoter. The directors’ responsibility is to control the affairs of the business and protect the company’s assets. There must also be a secretary who will be responsible for all registration and filling requirements this individual can also be the director.
Equity shares
To raise capital the company secretary must issue shares in the company. These shares are called equity shares. The people who buy the shares are called shareholders or members. The maximum amount that can be sold is set in the Memorandum. Equity shareholders are entitled to all the profits and losses of the company.
Preference shares
Preference shareholders do not have a share of the ownership of the business. They are not entitled to profits or assets in the event of the company being wound up. They are entitled to fixed dividends out of the profit of the company. If an individual has eight per cent preference share then at the end of the year that individual will make eight cent for every one euro worth of shares held.
Share nominal value
This is where a company issues shares there has to be a nominal value. This is designed when the promoters are drafting the Memorandum and Articles. Nominal value shares value at one euro but nominal values of fifty, twenty five, ten and five cents can be found. Whatever value chosen has little importance. If five thousand euro share capital has to be raised then the directors would have to issue five thousand equity shares for one euro or two thousand five hundred at fifty cent each. If an individual bought a thousand shares then that individual would own twenty per cent of the company.