The Companies Act of 2008 describes a Personal Liability Company as a Company ( Inc ) which satisfies the criteria of a Private Company. The Memorandum of Incorporation must also state that it is a Personal Liability Company ( Inc ).
It is essential that the Personal Liability Company has its Memorandum of Incorporation drawn up in the same way to that of a private company. This means that a Personal Liability Company is prohibited from offering any of their securities to the public. It is also restricted in how it transfers its securities.
There is a major difference that sets a Personal Liability Company apart from a private company. In its Memorandum of Incorporation it mentions that it is a Personal Liability Company. This means that the company’s directors, as well as past directors, are jointly liable, together with the company. They will remain liable for any debts and liability of the company that are or were contracted during their respective periods of serving as directors.
For more information on how we can help you with a Memorandum of Incorporation see the link below.
The Personal Liability Company is a company that replaced the incorporated / professional companies that were formed under the Companies Act of 1973. Professional persons, like stockbrokers, attorneys and auditors are expected to use this type of company. This type of company provides them with the benefits and convenience of a separate legal personality while still being able to comply with their professional rules. The main professional rule for which this type of company caters is the rule that requires these types of professionals to have personal liability.
Characteristics of a personal liability company
- A Personal Liability Company’s name must end with the word ‘Incorporated’ or with its abbreviation ‘Inc’. It is important that it is mentioned last in the company’s name and not at the beginning or in the middle.
- Just like with a private company, a Personal Liability Company is also required to have a minimum of one director on the board of directors. The Memorandum of Incorporation can however be altered to require more than one director on the board of directors.
- A Personal Liability Company is also, just like a private company again, not required to appoint an independent auditor, a company secretary, or an audit committee.
There are however some instances where a Personal Liability Company can appoint these professionals. The reason for appointing them can be one or all of the following:
- In the event that the Personal Liability Company’s Memorandum of Incorporation requires that these professionals are appointed.
- In some cases the Act or regulations will require that the financial statements of a specific Personal Liability Company must be audited.
The Personal Liability Company offers the professionals a great opportunity to still have their company as a separate legal entity, while they are still able to abide by their professional rules and regulations. So if you are in one of these careers, a personal liability company is just the right company for your profession.
We register your Personal Liability Company at CIPC. For more information, see the link below.