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Company Limited By Shares - Definition & Advantages of Company Limited By Shares

Company Limited by Shares: Explanation 

A company limited by shares is a joint-stock company where shareholders' liability is equal to their investment. It can be a private or public company. 

  1. Private companies have a maximum of fifty shareholders, do not publicly offer shares, and restrict share transfer.
  2. Public companies need at least seven shareholders, publicly offer shares, and allow free share transfer.

Advantages of a Company Limited by Shares 

Here are some advantages of a company limited by shares: 

  1. Limited Liability: Shareholders cannot be held liable for debts beyond their investment.
  2. Shareholder Control: Shareholders can elect the board of directors, influencing company operations.
  3. Financial Stake and Incentives: Shareholders are incentivized to ensure company success due to their financial stake.
  4. Capital Generation: These companies can raise capital by selling shares, funding growth and investment opportunities.
  5. Ownership and Management Flexibility: There is flexibility in ownership arrangements and management models.

Setting Up a Company Limited by Shares: Requirements 

To set up a company limited by shares, one must: 

  • Appoint at least one director.
  • Have a registered office address in the relevant jurisdiction.
  • Obtain a company seal.
  • Prepare articles of association, outlining the company's internal regulations.
  • Have at least one shareholder.


In summary, a company limited by shares offers shareholder protection, investment attraction, and capital raising opportunities. To establish such a company, there are specific requirements to meet. It's a good option for business starters seeking protection and flexibility.