Unlimited Companies: The What, Why and When

What is an unlimited company?

An unlimited company is a type of private company. It has some features similar to a limited company. It is registered at Companies House and it has members (usually shareholders) and directors, among other standard features of limited companies.

However, the shareholders (or members) of this type of company have unlimited liability. This means each member is jointly and severally liable for the debts of the company in the event of its insolvent winding-up. If the company needs more money to pay its debts or liabilities on winding up, it can call on the shareholders to contribute whatever amount is necessary to make up the shortfall.

Why would you choose this type of company?

An unlimited company is most commonly chosen when the owners do not wish to publicly file financial information with the registrar. This advantage of this company is that it’s exempt from filing its 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).

It’s also a bit less complex to return capital to shareholders of an unlimited company, as 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 corporate group structure if the ability to more freely move capital is desired.

When would you form this type of company?

This type of UK company is suitable for a business where the risk of insolvency is very low or non-existent, or where it is important, for whatever reason, not to have the company's accounts on the public register at Companies House.

How does this type of company formation work?

Under the Companies Act 2006, an individual can act as both director and first member from the outset. These types of companies are formed by paper application only and the IN01 needs to be delivered to the registry along with the Memorandum of Association and Articles of Association which will include an unlimited liability clause.

There are usually very few unlimited companies, but this may very well be because their existence and value are not widely understood.

How can we help?

Here at Jordans, we can take away the administration hassle by completing the IN01 for you. We also provide the Articles of Association that have been custom drafted by leading counsel.

If you have any queries or you’re interested in setting up an unlimited company, please contact our team on 0117 918 1391 or email us at companyformation@jordans.co.uk and we can send you across a simple order form.


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