The basic main motivation behind choosing to incorporate your company or business is the protection of limited liability. A lot of sole proprietors, partnerships, and others opt to become a private limited company to a limited liability one. Once it is done the business enjoys a separate legal status while financial identity is separately identified. A shareholders liability in such companies is limited as per their shares and the shareholding they have in a business. However, Lawyers must be engaged when it comes to forming a new company or emerging with a company in UAE.
The Company’s Shareholders are Responsibles
A Company’s shareholders are held responsible for the company’s action according to the established regulations. This means that shareholders are accountable within their shareholdings for the course of business. If any of the shareholders has issued a cheque on the behalf of the business then he is personally responsible for it.
Under a Limited Liability
Under a limited liability company, a shareholder needs to pay the company for the shares taken, and thus, the debts are the responsibility of the company, not the owners of it. In simple terms, a shareholder’s liability is restricted meaning he is only at risk of losing only if a business completely fails, and thus, the money invested inside is lost.
A shareholder remains liable to pay for their shares while on the contrary, they are not responsible for the company’s debts. Similarly, the shareholders can benefit from private limited and public limited companies. A shareholders limited liability becomes the legal status that restricts the financial liability of the shareholders with a fixed amount.
Corporate Law and Bankruptcy
Most aspects of corporate law regarding the rights of shareholders of a company are similar while the nominee shareholders’ rights and duties have some unique particulars. The nominee shareholders’ rights and obligations are not restricted. This means that nominees are termed as the actual owners of the company. This means that a Limited Liability Company can have a minimum of 2 partners or shareholders to up to 50. And each one of them is liable to the extent of their shareholding or the capital they have invested in a company. Under this, the company and the shareholders are viewed as separate legal entities.
If the company falls into bankruptcy the shareholders have a limited liability equivalent to the original investments they have made in the company. More people are attracted to investing in such companies with the lower risk associated with the investment done. This means that their home and personal finances and property are not at stake if the company fails. The concept of limited shareholders liability encourages and motivates the entrepreneurs to open new businesses and companies and thus, investors also turn towards investing in them. Shareholders’ limited liability also makes sure that the assets can be sold to repay or offset the debts and creditors of the company. Selling of the company and its assets will lead to repayment to the creditors. The company may own machinery, building, tools, property, technology, equipment, stocks, goods, and much more which are the assets of the company.