Company law Essay Example | Topics and Well Written Essays - 1500 words

Company law - Essay Example In instances where calls are not met, the shares are forfeited. The main advantage of a no liability company is that the investor has a chance of pulling out if the company has no future. S 112(2) provides that a no liability company must be a mining company, which has a company constitution stating its objects in mining. The provision of section S 148(4) is that a no liability company must use â€Å"No liability† or â€Å"NL† at the end of the company's name. The no liability companies restricted to companies that have an object of mining only. The concept of no liability increases investment in the industry as it does not bind to its shareholders and they can withdraw from the company2. The difference between a no liability company and other companies is that a no liability company’s shareholders are not liable to pay calls on any unpaid shares. The conventional provision of companies is that the purchase of shares is a contract that is binding and shareholders bound to pay for the shares when there is a call. The position is that if the shareholder does not pay the share there is a forfeiture of the already paid up shares and the unpaid shares. The provision of a no liability company concerning the shares gives confidence investors in potentially uncertain mining undertaking. This is the reason because a shareholder who has unpaid shares can elect to pull out from the company without any legal penalties. In the case of Mac Stevenson, the best company would be a no liability company. The choice of a no liability company is because the mining ventures are uncertain and; therefore, investors are not willing to invest in such companies. The provisions of the no liability company tend to encourage investors into investing in mining companies. When there is uncertainty in the ventures of a company the investors would still be willing to buy the company shares. This is because they are not compelled to pay on making of calls to pay. The provisi ons of a no liability company fit this provision, as the shareholders who will purchase the share in the Mac Stevenson’s company will be more willing to invest in the venture. This is especially so since they are uncertain in the future of the company they will not be bound to pay the unpaid share if they will see no future for the company. The company will be a small company, according to 45A a company can be a large or a small company. Mac Stevenson’s company will fit into the small company. This is because it satisfies two of the criteria that are it should have gross operating revenue of less than $25m and its gross assets are less than $12.5m. Mac Stevenson’s company has operating revenue of less than $25m and its gross assets are not in excess of $12.5m, therefore, fits into the category of small business. On the other hand, Mac Stevenson can the can expand the business to install solar panels with the batteries3. However, the expansion cannot be done the any liability company as the provision of the no liability company restricts the operations of companies registered as no liability to only mining ventures and as such, they cannot operate other business dealings like installing solar panels4. The expansion realized when the company converts to a limited liability company. The general undertaking is that when a no liability mining company becomes