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An unlimited company or private unlimited company is a hybrid company incorporated either with or without a share capital (and similar to its limited company counterpart) but where the liability of the members or shareholders is not limited - that is, they are liable to contribute whatever sums are required to pay the outstanding debts (if any) of the company should it ever go into formal liquidation and its assets are insufficient to pay its debts and liabilities and the expenses of liquidation. In that situation, the members or shareholders are liable for the shortfall. As with its counterpart the limited company, its members or shareholders have no direct liability to the creditors of an unlimited company.

Unlimited companies are found in the United Kingdom, Ireland, Hong Kong, Pakistan, Nigeria, India, Australia and other jurisdictions where the company law is derived from English law, as well as other sovereign states such as Germany and France. A similar entity, the unlimited liability corporation, exists in Alberta and Nova Scotia in Canada. In the United Kingdom they are formed or incorporated by registration under the Companies Act 2006.

An unlimited company has the benefit and status of incorporation same as its limited company counterpart. Situations where an unlimited company will be preferred to an alternative business model or its limited company counterpart include:

  • secrecy concerning financial affairs is desired, effectively shielding its financial affairs from its competitors and making them non-public information including shareholder dividend payments: a United Kingdom unlimited company, unlike its limited company counterpart, is generally not required to publish or make public its company financial statements[1].
  • the company will not trade (e.g. might only be used to hold title to property).
  • the company is trading but in an area where limited liability is not acceptable, vital or practical.
  • there is a low risk of insolvency.
  • the company or its trading activities has or generates sufficient capital, funds or financing without need to approach general lenders such as high-street retail banks.
  • developing more advantageous company and business capital strategies in an ever increasing irreversible trend of bank disintermediation by companies and their management.
  • a focused higher standard of board of directors and executive management level behaviour and business model for risk management.
  • a flow-through entity is required for United States federal tax purposes, under the entity classification rules.

Once formed or incorporated, an unlimited company can in some jurisdictions also re-register and designate itself to limited company status at any time with few formalities, the same also extends to a limited company which may at any time re-register and designate itself to an unlimited company status.

Examples of notable Unlimited Companies

The unlimited company is a not too common or perhaps well known or promoted form of company incorporation and is not always required under company law to add or state the word Unlimited or its abbreviations (Unltd., or Ultd.) at the ending of its legal company name, making it not easily recognizable. However, a notable example in the United Kingdom was the national subsidiary of the international retail clothing group C&A (UK company number 00524665). Other notable examples are the global trading British all-terrain vehicle manufacturer Land Rover (UK company number 04019301), The Equitable Life Assurance Society (UK company number 00037038), Credit Suisse International (UK company number 02500199) the United Kingdom investment banking arm of the Credit Suisse Group and C. Hoare & Co (UK company number 00240822) England's oldest privately owned bank founded in 1672 by Sir Richard Hoare.

Other notable global trading companies such as Mobil Producing Nigeria Unlimited (a subsidiary of Exxon Mobil) and Texaco Overseas (Nigeria) Petroleum Company Unlimited (part of the merged Chevron and Texaco petroleum conglomerates) exist in Nigeria, amongst others. In the USA, another notable example is the American Express Company, which once was a publicly traded unlimited liability company, re-incorporating itself to a limited liability company status only in 1965.

In Ireland, local subsidiaries of a number of United States of America companies have registered as unlimited companies to shield their finances from public view.[2] Janssen Pharmaceutical, a subsidiary of Johnson & Johnson re-registered as an unlimited company to avoid needing to file annual reports, effectively making a portion of Johnson & Johnson's financial information private and non-public information.[2] Apple Computer's Irish division did the same.[3]

References

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