Types of Companies

Types of Companies categories: registered and statutory companies.

Joint Stock Companies

A joint stock company refers to a corporate association of a number of people for some common object or objects. The members of a joint stock company contribute capital to form a common stock to carry on a business usually for profit.

A joint stock company is a corporate body i. e. it is created under the law and has an entity of its own quite separate form members who own it.

Therefore, under the law, a joint stock company is a fictitious but a legal person that can enter into contracts, own property, incur liabilities, sue others and be sued by others.

It can only do what it has been formed to do.

Statutory Companies

They are created by an Act of parliament. The powers and functions of these companies are defined by the Acts that create them. Most Companies owned by the Kenya Government (commonly referred to as parastatal organizations) fall in this category e. g. Agricultural Finance Corporation (AFC).

  

Registered Companies

These are companies that are formed, registered and operate under the Companies Act, 1962, Cap. 486, Laws of Kenya. These constitute the most common type of companies and are the main focus for this course topic.

Registered companies may further be divided into public, private, limited or unlimited companies.

Public Companies

These companies must have a minimum membership of seven but there is no maximum number. Their shares are freely transferable usually through the Nairobi Stock Exchange. Shares and debentures are open for public subscription. Certificates of trading and annual audit accounts are compulsory. The minimum number of directors is two. They may have limited or unlimited liability.

         

Private Companies

They can be described as an advanced form of partnership. The minimum membership is two and the maximum is fifty excluding past and present employees. Their shares are not freely transferable. They cannot offer shares or debentures to the public for subscription. They must have at least one director. They commence business on receipt of Certificate of incorporation from the Registrar of Companies. Presentation of prospectus and audited accounts is not compulsory for private companies.

         

Limited and unlimited Companies

In a limited company, the liability of members is limited to a stated amount, usually to the face value of shares a member holds in the company.

The liability of unlimited companies is unlimited like those of sole traders and general partners. There are however no unlimited companies in Kenya.

Differences between Public and Private Limited Companies

Private Company	Public Company
Membership: Minimum is 2 and maximum is 50	Membership: Minimum is 7 and maximum is unlimited
Cannot offer shares or debentures to the public for subscription	Shares and debentures are open to the public for subscription
Presentation of prospectus and audited accounts is not compulsory	Certificate of trading and annual audit of accounts are compulsory
Must have at least 1 director	Minimum numbers of directors is 2
Can commence business immediately after registration is issued	Cannot commence business until a certificate of incorporation has been issued
Must restrict the right to transfer its shares	The right to transfer shares is unrestricted
Its name must include the word “private”	Its name has only the word “limited”
Need not hold a statutory meeting or produce a statutory report	Must hold a statutory meeting and produce a statutory report

Formation of a Company

Persons intending to form a joint stock company are required to furnish the Registrar of Companies with the following documents:

• Memorandum of Association
• Article of Association (or adoption of model Articles, termed Table A in the Act).
• List of Directors, with details of names, addresses, occupations, shares subscribed and statement of agreement to serve as directors.
• A statement signed by directors stating that they agree to act as such
• A declaration that the necessary requirements of registration have been duly complied with. This declaration can be signed by the company Secretary or by one of the directors or promoters of the company.

If the documents are found to be in order by the Registrar of Companies, he may ask the promoters of the company to pay the necessary registration fees upon which a Certificate of Incorporation giving legal entity to the company is issued.