The requirement of 2 shareholders and the single member company.
The limited liability company is a form of business organisation, formed between two or more persons with the object of carrying out some trade or activity.
A company is formed by two or more shareholders. This has been a basic principle of company law in Malta, and the U.K., for many years. This general rule is subject to exceptions. The word "partnership" implies that there are two or more people. What if a partnership is formed between two shareholders, A and B, and subsequently B transfers all his shares to A? It will be left with one shareholder. If a company continues with just one shareholder for more then six months some problem will arise. Does it make full legal sense to insist on the principle that there should be at least two partners? In the Maltese experience, over the last few decades, a number of partnerships were set up between two partners to satisfy the law but with one of the shareholders owning almost all the shares.
Example:.
AB Ltd.
.
A B.
9999 shares 1 share.
Thus the requirement of two partners became a legal fiction. The Companies Act allows for a "single members company." There are certain requirements:.
1. It must be a private, exempt company.
2. The objects in the company must state what the main activity of the company is.
In our law we distinguish between public and private companies. A private company cannot have more than 50 shareholders. On the other hand, a public company has to have a minimum of 2 shareholders and an infinite number of shareholders.
The division of capital into shares.
A company's capital is divided into shares. This is a fundamental feature of the limited liability company.
Stephen Griffin wrote:.
"The immediate result of a company's incorporation is the creation of two independent bodies: the company and its membership. The membership of a limited company takes shares in the company.