Discuss the nature of shares in a limited liability company, with particular reference to the distinction between ordinary shares and preference shares and the rights and obligations, if any, generally attached thereto.
The limited liability company is defined in Section 67:.
67. A company is formed by means of a capital divided into shares held by its members. The members" liability is limited to the amount, if any, unpaid on the shares respectively held by each of them.
There are some expectations to the members" limited liability. One cannot hide behind the concept of limited liability forever, and the court can decide to render a member liable.
The limited liability company is the most important type of business organisation. A company is an organisation that is set up, usually between two or more people, with the aim of generally running s business. By way of exception, a company can also be constituted by one person. Another reservation is that, although as a general rule a company is formed for the purpose of trade or business, in reality the law does not require that purpose of a company.
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Once a company is registered at the Malta Financial Services Centre, that company becomes a separate legal person, distinct from its members/shareholders who constituted the company in the first place. As a separate person, a company can enter into any contract or transaction, just as an ordinary businessman does.
Example:.
Lm 500(capital).
500 shares of Lm 1.
A = 200.
B = 200.
C = 100.
If the shareholders fully pay up the Lm 500 and subsequently the company goes bankrupt, then they will not be liable for the debts. A shareholder's liability is limited to the amount paid for his shares. Thus, there is a distinction between shares, which are fully paid up, and those, which are not fully paid up. If one's shares are only paid up, then that shareholder remains liable to the extent of the unpaid part of the share capital.
