What is an unlimited company?
This type of company has many similar features to a private limited company. It is registered at Companies House, it has members (usually shareholders), it has directors and Articles of Association, etc. However, with an unlimited company its shareholders (or members) have unlimited liability. This means that each member is jointly and severally liable for the debts of the company in the event of its winding-up. So if the company needs more money to settle its debts or liabilities on winding up it can call on the shareholders to contribute whatever amount is necessary to make up any shortfall.
Why would you form this type of company?
There are few unlimited companies, with only 5130 currently on the register.* This may be because their existence and advantages are not widely known or appreciated.
Probably the single biggest advantage of an unlimited company is that it is exempt from filing annual accounts with Companies House (unless the company has been either a subsidiary undertaking or a parent company of an undertaking which is limited during the relevant accounting period). So, commonly, this type of company is chosen where the owners do not wish the company's accounts to appear on the public record.
It's also much easier to return capital to shareholders of an unlimited company, since the restrictions on return of capital contained in the Companies Act 2006 only apply to limited companies. For this reason, they may be very useful within a group structure where flexibility to move capital within the group is desired.
An unlimited company may also be useful where a company is required for a specific transaction and unlimited liability is not regarded as a problem, or for a business where the risk of insolvency is very low or non-existent.
How would you form this company type?
An unlimited company may be formed with a single director and member, who may be the same individual. Unlimited companies can only be formed by paper application – form IN01 should be completed and submitted to Companies House together with the Memorandum of Association and Articles of Association which will include an unlimited liability clause.
How can Jordans help?
We'll provide all the relevant documentation, including the Articles of Association, custom-drafted by leading counsel. We can also complete form IN01 for you and liaise with Companies House on your behalf. For help or further information, please contact us on 0117 918 1391 or email firstname.lastname@example.org.
*source Companies House