{"id":221732,"date":"2023-03-17T16:15:11","date_gmt":"2023-03-17T03:15:11","guid":{"rendered":"https:\/\/legalvision.co.nz\/?p=221732"},"modified":"2023-03-24T11:42:59","modified_gmt":"2023-03-23T22:42:59","slug":"company-limited-by-shares","status":"publish","type":"post","link":"https:\/\/legalvision.co.nz\/business-structures\/company-limited-by-shares\/","title":{"rendered":"What is a Company Limited by Shares in NZ?"},"content":{"rendered":"<p><span style=\"font-weight: 400\">In New Zealand, the most common company structure is a limited liability company, being a company limited by shares. This structure means that your shareholders have limited liability as opposed to an unlimited company. This article will outline what a limited liability company is and how it differs from an unlimited company.<\/span><\/p>\n<h2><span style=\"font-weight: 400\">What Does a Company Limited by Shares Mean?<\/span><\/h2>\n<p><span style=\"font-weight: 400\">A company limited by shares means that the liability of shareholders is limited to paying any amount owing on their shares. Unless they provide personal guarantees to lenders or creditors of the business (for example, a bank), those shareholders will not be liable for any debts the company cannot pay.\u00a0<\/span><\/p>\n<div class=\"box box--icon box--info\">\n<p><span style=\"font-weight: 400\">In New Zealand, you can tell whether or not a company is limited as it will have limited, Ltd or Tapui at the end of its name.<\/span><\/p>\n<\/div>\n<p><span style=\"font-weight: 400\">A limited liability company is required to hold <\/span><a href=\"https:\/\/legalvision.co.nz\/corporations\/3-key-annual-obligations-for-a-company\/\"><span style=\"font-weight: 400\">annual general meetings<\/span><\/a><span style=\"font-weight: 400\"> for the company&#8217;s shareholders. During an annual general meeting, key matters to be discussed include:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400\"><span style=\"font-weight: 400\">financial and other related information for shareholders to approve;<\/span><\/li>\n<li style=\"font-weight: 400\"><span style=\"font-weight: 400\">resolutions requiring approval; and<\/span><\/li>\n<li style=\"font-weight: 400\"><span style=\"font-weight: 400\">appointing new directors by shareholders with voting rights.\u00a0<\/span><\/li>\n<\/ul>\n<h2><span style=\"font-weight: 400\">Private Limited Company<\/span><\/h2>\n<p><span style=\"font-weight: 400\">A limited liability company can be either a private or public company. Whichever one you choose has its own features, advantages, and disadvantages.\u00a0 A <\/span><a href=\"https:\/\/legalvision.co.nz\/corporations\/selling-shares-private-company\/\"><span style=\"font-weight: 400\">private limited liability company<\/span><\/a><span style=\"font-weight: 400\"> is typically smaller than a public limited liability company and suitable for small to medium-sized businesses. Family-owned and operated companies will typically be private, as will startup ventures. The general public cannot invest in private companies.<\/span><\/p>\n<p><span style=\"font-weight: 400\">A private limited company has advantages, including:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400\"><span style=\"font-weight: 400\">having a separate legal entity, meaning the company&#8217;s assets and liabilities are separate from the assets and liabilities of the directors; and<\/span><\/li>\n<li style=\"font-weight: 400\"><span style=\"font-weight: 400\">having perpetual succession, so the company is unaffected by the death of a person or exit of a member.<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400\">Although a private limited company has some advantages, it also comes with disadvantages, such as:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400\"><span style=\"font-weight: 400\">restricted ability to transfer shares;<\/span><\/li>\n<li style=\"font-weight: 400\"><span style=\"font-weight: 400\">a cap of no more than 50 shareholders; and<\/span><\/li>\n<li style=\"font-weight: 400\"><span style=\"font-weight: 400\">inability to issue shares to the public, so capital cannot be raised as quickly as a public company.<\/span><\/li>\n<\/ul>\n\n<a href=\"#content-next\"\n   class=\"block p-4 mt-10 text-xl font-bold text-center text-white no-underline bg-gray-800 rounded-t-xl\">\n    Continue reading this article below the form\n    <i class=\"text-xl fa-regular fa-arrow-down\"><\/i>\n<\/a>\n<div class=\"px-6 pt-10 pb-12 mb-10 text-center bg-gray-100 rounded-b-xl sm:px-12 test\">\n    <div class=\"mb-8 text-2xl font-bold text-orange\">\n        Need legal advice?\n        <br>\n        <span class=\"text-lg not-prose\">\n                            Call <a href=\"tel:+64800005570\" class=\"not-prose\">0800 005 570<\/a> for urgent assistance.\n                <br>\n                Otherwise, complete this form, and we will contact you within one business day.\n                    <\/span>\n    <\/div>\n\n    \n\n<div class=\"not-prose flex 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They are\u00a0suitable for larger companies that wish to raise money from members of the public rather than being owned by founders, management or private investors.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400\">A public limited liability company has the following features:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400\"><span style=\"font-weight: 400\">can issue shares to the general public, typically, via the NZX Main Board;<\/span><\/li>\n<li style=\"font-weight: 400\"><span style=\"font-weight: 400\">has no limit on its number of shareholders;<\/span><\/li>\n<li style=\"font-weight: 400\"><span style=\"font-weight: 400\">has unrestricted rights granted to shareholders to transfer shares; and<\/span><\/li>\n<li style=\"font-weight: 400\"><span style=\"font-weight: 400\">is subject to a more strict regulatory regime than private companies.<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400\">The advantages of a public limited company include the following:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400\"><span style=\"font-weight: 400\">it can raise finance through share capital;<\/span><\/li>\n<li style=\"font-weight: 400\"><span style=\"font-weight: 400\">potential to grow due to the ability to issue shares to the general public; and<\/span><\/li>\n<li style=\"font-weight: 400\"><span style=\"font-weight: 400\">an opportunity to achieve economies of scale due to its larger business structure.<\/span><\/li>\n<\/ul>\n<p><span style=\"font-weight: 400\">However, there are disadvantages that you should consider, such as:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400\"><span style=\"font-weight: 400\">the costs of setting up a public limited company;<\/span><\/li>\n<li style=\"font-weight: 400\"><span style=\"font-weight: 400\">greater risk of hostile takeover because the company cannot control who buys its shares; and<\/span><\/li>\n<li style=\"font-weight: 400\"><span style=\"font-weight: 400\">the potential for conflict to arise between shareholders during decision-making procedures.<\/span><\/li>\n<\/ul>\n    <div class=\"my-7 lg:my-10 border-y-2 border-gray-100 py-7 lg:py-10 flex flex-col sm:flex-row items-start gap-10\">\n                    <img decoding=\"async\" class=\"w-52 mx-auto my-0! rounded\" src=\"https:\/\/img.legalvision.com.au\/wp-content\/uploads\/sites\/2\/2022\/10\/11133736\/NZ-Directors-Duties-560x792-1.jpg\" alt=\"Front page of publication\"\n                 loading=\"lazy\" width=\"208\" height=\"298\">\n                <section>\n            <div class=\"text-2xl font-bold\">NZ Directors Duties<\/div>\n            <div class=\"body-text\">\n                <p>Understand your role as a director and how to meet your legal obligations. Download our free guide today.<\/p>\n            <\/div>\n            \n\n<a href=\"https:\/\/go.legalvision.co.nz\/nz-directors-duties-guide.html\" class=\" block px-5 py-3.5 max-w-fit bg-orange button__hover transition rounded text-white font-bold text-lg no-underline uppercase leading-tight text-center\" target=\"\" rel=\"\">Download Now<\/a>        <\/section>\n    <\/div>\n\n<h2><span style=\"font-weight: 400\">Key Takeaways<\/span><\/h2>\n<p><span style=\"font-weight: 400\">A company limited by shares entails shareholders only being liable for the money owing on their shares. Limited liability companies can be either private or public. A private limited liability company is suitable for small to medium-sized companies owned by founders, management or a group of private investors. You can convert a private limited liability company to a public company by undertaking an initial public offering to sell shares to the public on the NZX Main Board. Public companies are subject to stricter regulatory rules given the public element.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400\">It is essential to consider what business structure will suit your business before incorporating it. If you need legal advice concerning business structures, our experienced <\/span><a href=\"https:\/\/legalvision.co.nz\/corporate-lawyers-lp\/\"><span style=\"font-weight: 400\">corporate lawyers<\/span><\/a><span style=\"font-weight: 400\"> can <\/span><span style=\"font-weight: 400\">assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on <a href=\"tel:+64800005570\" class=\"AVANSERnumber dynamic-number\">0800 005 570<\/a> or visit our <\/span><a href=\"https:\/\/legalvision.co.nz\/membership\/\"><span style=\"font-weight: 400\">membership page<\/span><\/a><span style=\"font-weight: 400\">.<\/span><\/p>\n<h2><span style=\"font-weight: 400\">Frequently Asked Questions<\/span><\/h2>\n\n\n<div class=\"schema-faq wp-block-yoast-faq-block\"><div class=\"schema-faq-section\" id=\"faq-question-1679022610752\"><strong class=\"schema-faq-question\"><strong>What is a company limited by shares?<\/strong><\/strong> <p class=\"schema-faq-answer\">A company limited by shares means its shareholders are only liable for the money owing on their shares. If the business goes into debt, creditors cannot come after a shareholder\u2019s personal assets unless the shareholder has given them a personal guarantee.<\/p> <\/div> <div class=\"schema-faq-section\" id=\"faq-question-1679022625509\"><strong class=\"schema-faq-question\"><strong>What are the types of limited companies?<\/strong><\/strong> <p class=\"schema-faq-answer\">You can either have a private or public limited liability company, depending on what suits your needs and business.\u00a0<\/p> <\/div> <\/div>\n<div class=\"not-prose m-feedback-prompt\">\n    <!-- Thumbs up\/down bar -->\n    <div class=\"m-feedback-prompt__main\">\n        <div class=\"m-feedback-prompt__title\">Was this article helpful?<\/div>\n        <div>\n            <!--span class=\"m-feedback-prompt__button--text\">Thanks!<\/span-->\n            <button type=\"button\" class=\"m-feedback-prompt__button m-feedback-prompt__button--yes\"\n                    data-analytics-link=\"feedback-prompt:yes\" aria-label=\"Agree\">\n                <i class=\"fa-regular fa-thumbs-up fa-3x\"><\/i>\n            <\/button>\n            <button type=\"button\" class=\"m-feedback-prompt__button m-feedback-prompt__button--no\"\n                    data-analytics-link=\"feedback-prompt:no\" aria-label=\"Disagree\">\n                <i class=\"fa-regular fa-thumbs-down fa-3x\"><\/i>\n            <\/button>\n        <\/div>\n    <\/div>\n\n    <!-- Feedback form -->\n    <div class=\"m-feedback-prompt__form\">\n        <div class=\"m-feedback-prompt__form--thanks \">\n            <div>Thanks!<\/div>\n            <p>\n                We appreciate your feedback \u2013 your submission has been successfully received.            <\/p>\n        <\/div>\n        <form id=\"contact-form\" class=\"m-feedback-prompt__form--form\" action=\"\" method=\"post\">\n            <input type=\"hidden\" id=\"authenticity_token\" name=\"authenticity_token\" value=\"90c4126e1b\" \/><input type=\"hidden\" name=\"_wp_http_referer\" value=\"\/api\/wp\/v2\/posts\/221732\" \/>            <input value=\"https:\/\/legalvision.co.nz\/business-structures\/company-limited-by-shares\/\" type=\"hidden\" name=\"currenturl\"\n                   id=\"currenturl\">\n            <input value=\"What is a Company Limited by Shares in NZ?\" type=\"hidden\" name=\"currenttitle\"\n                   id=\"currenttitle\">\n            <label>\n                <!-- display on thumbs-up -->\n                <span class=\"m-feedback-prompt__feedback m-feedback-prompt__feedback--yes\">\n                    Can you tell us <span class=\"font-semibold\">why<\/span> you found it helpful?\n                <\/span>\n\n                <!-- display on thumbs-down -->\n                <span class=\"m-feedback-prompt__feedback m-feedback-prompt__feedback--no text-lg\">\n                    How can we better improve this article?\n                <\/span>\n                <textarea name=\"feedbackmessage\" id=\"feedbackmessage\" required><\/textarea>\n            <\/label>\n\n            <div class=\"m-feedback-prompt__form--error\" id=\"form-submit-error\"><\/div>\n            <button id=\"submit-contact-form-button\" type=\"submit\" name=\"commit\" class=\"m-feedback-prompt__form--submit\"\n                    data-analytics-link=\"feedback-prompt:submit\">\n                Submit            <\/button>\n        <\/form>\n    <\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>In New Zealand, the most common company structure is a limited liability company, being a company limited by shares. This structure means that your shareholders have limited liability as opposed to an unlimited company. This article will outline what a limited liability company is and how it differs from an unlimited company. What Does a<a href=\"https:\/\/legalvision.co.nz\/business-structures\/company-limited-by-shares\/\">Continue reading <span class=\"sr-only\">&#8220;What is a Company Limited by Shares in NZ?&#8221;<\/span><\/a><\/p>\n","protected":false},"author":13316,"featured_media":215607,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"_relevanssi_hide_post":"","_relevanssi_hide_content":"","_relevanssi_pin_for_all":"","_relevanssi_pin_keywords":"","_relevanssi_unpin_keywords":"","_relevanssi_related_keywords":"","_relevanssi_related_include_ids":"","_relevanssi_related_exclude_ids":"","_relevanssi_related_no_append":"","_relevanssi_related_not_related":"","_relevanssi_related_posts":"2344,221312,218885,219711,221220,205422","_relevanssi_noindex_reason":"","editor_notices":[],"footnotes":""},"categories":[4],"tags":[54,894,1288,1682,1830],"class_list":["post-221732","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business-structures","tag-medium-business","tag-large-business","tag-limited-liability","tag-company-incorporation","tag-limited-by-shares"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.1.1 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>What is a Company Limited by Shares in NZ? | LegalVision NZ<\/title>\n<meta name=\"description\" content=\"A company limited by shares means that the liability of shareholders is limited to paying any amount owing on their shares. 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