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Company Law
Notes 3.2.3 Hybrid Companies
A company limited by shares as well as by guarantee is a hybrid form of company which
combines elements of the guarantee and the share company. Such a company raises its initial
capital from its shareholders, while the normal working funds are provided form other sources
such as fees, charges, subscription, etc. Every member of such a company is subject to a two-fold
liability, i.e., the guarantee which may become effective in the winding up of the company and
the liability to pay up to the nominal amount of his share which may become effective during
the lifetime of the company or at the time of winding up.
3.2.4 Companies with Unlimited Liabilities
An unlimited company is a company not having any limit on the liability of its members. The
members of such a company are liable, in the event of its being wound up, to the full extent of
their fortunes to meet the obligations of the company. However, the members are not liable to
the company’s creditors. The company, being a separate legal entity from the persons who
constitute it, is liable to its creditors. If the creditors cannot obtain payment from the company,
they may petition the court for the winding up of the company. The Liquidator will then call
upon the members to contribute to the assets of the company without limitation of their liability
for the payment of the debts of the company.
Self Assessment
Fill in the blanks:
1. If a company is incorporated by a charter granted by the monarch, it is called a
............................................
2. The State Bank of India and the Industrial Finance Corporation of India are two examples
of ............................................ companies.
3. A company limited by guarantee is known as ............................................
4. A pure ‘guarantee company’ does not have a ............................................
3.3 Classification on the Basis of Number of Members
From the point of view of the general public and on the basis of number of members, a company
may be classified as:
1. Private company
2. Public company
3.3.1 Private Company
A private company can be formed by merely two persons by subscribing their names to the
Memorandum of Association. It means a company which has a minimum paid-up capital of one
lakh rupees or such higher paid up capital as may be prescribed; and by its Articles:
1. Restricts the rights of its members to transfer shares;
2. Limits the number of its members to fifty, excluding its employee-members or past
employee-members; provided that where two or more persons hold one or more shares
in a company jointly, they shall, for the purpose of this definition, be treated as a single
member;
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