Types of Companies

Although company law is concerned with registered companies our Kenyan law recognizes other corporations which shares attributes similar to those of the registered company.
1. Corporations Sole.
This is a legally established office distinct from the holder and can only be occupied one person after which he is succeeded another. It is a legal person in its own right with limited liability, perpetual succession, capacity to contract, own property and sue or be sued. E.g. include the Office of the public trustee and the Office of the Permanent Secretary to the Treasury.
2. Corporations Aggregate
This is a legal entity formed two or more persons for a lawful purpose and whose membership consists of at least two persons. It has an independent legal existence with limited liability, capacity to contract, own property, sue or be sued and perpetual succession. E.g. public and private companies.
3. Registered Corporations
These are corporations created in accordance with the provisions of Companies Act. Such companies come into existence only when they are registered under the Companies Act. Certain documents must be delivered to the Registrar of companies to facilitate registration of the company. Such companies come into existence only when they are registered under the Act and a certificate of incorporation issued the Registrar of companies. E.g. memorandum of association, Articles of association, statement of nominal capital.

1. Registered companies may be classified as under:
i. Companies Limited Shares
These are companies having the liability of the members limited the memorandum to the amount, if any, unpaid on the shares held, beyond which the member is not liable. In Salomon’s case, Salomon was not liable to contribute the assets of the company as his shares were fully paid. If a member has paid the entire value of his shares, he does not owe any further liability to the company and if he has partly paid the value of his shares, the liability of such member is limited to the value of the unpaid amount of their shares held them. The liability of the shareholder to pay the unpaid amount can be enforced during the existence of the company or during its winding up.
If the company is registered as limited it must add the words “LTD” at the end of its name. If the company uses the word “limited” as part of its name when actually it is not registered, it commits an offence.
ii. Companies Limited Guarantee
 These are companies having liability of its members limited to the amount which they have undertaken to contribute to the assets of the company in the event of its being wound up while they are still members or within one year of cessation of membership.
 It does not have a share capital
 Its certificate of incorporate states that it is a company limited guarantee.
N.b: Subsection (1) does not prohibit a company limited guarantee from having a share capital if it was formed and registered before the commencement of this section.
iii. Unlimited liability Companies
These are Companies not having the liability of their members limited the memorandum. Such members a reliable to lose private assets in the event of the company’s insolvency.

2. Registered companies may also be classified as under
iv. Private companies
Private companies are identified under section 9(1) of the Companies Act which provides that a private company is a company which, its Articles of association,
v. Public companies
A public company must have a minimum of 7 members.
4. Statutory Corporations
These are corporations created Acts of Parliament or an order of the President in accordance with the provisions of Section 3 (1) of the State Corporations Act (Cap 446).
A state corporation is a legal person with perpetual succession. In case of a corporation created an Act of Parliament, the Act gives it a name, management structure and prescribes the objects.E.g. Kenya Wildlife Services, Agricultural Finance Corporation, Public Universities, Central Bank etc.
5. Chartered Corporations
These are corporations created a charter granted the relevant authority.
The charter constitutes the association a corporation the name of the charter. E.g. Private Universities are chartered corporations under the Universities Act, Chapter 210 Laws of Kenya. To establish a private university, an application must be made to the Commission for Higher


which forwards the same to the Minister for


who in turn forwards the same to the President for the grant of a charter.
The Charter must set out the name, membership, powers and functions of the University. Under Section 14 of the Universities Act, a private University becomes a legal person when the charter is published in the Kenya Gazette the Minister in charge.
6. One Man Company
In these companies, the one man holds practically the entire share capital of the company.

Such a company is perfectly valid in the eyes of the law. It has its own entity which is separate from the entity of its member.
The new Companies Act 2015 introduces a one man company as provided in sec 11(1) which states; one or more persons who wish to form a company may subscribe their names to a memorandum of association.
Formation of Registered companies Preliminaries
These are the factors to be taken into consideration and to be ascertained before a company is formed.
1. The name of the company.
It is the duty of promoters to determine and set the company’s name. This is because a company can only be identified its name. Promoters have the liberty to give the company any name. However, there are certain statutory restrictions.
2. Public or private company.
Promoters must determine whether the company they intend to form is public of private. Characteristics of a private company
Private companies are identified under section 30(1) of the Companies Act which provides that a private company is a company which, its Articles of association,
a. Limits the number of members to 50 excluding current and former employees who are members.
b. Restricts the rights to transfer its shares.
c. Prohibits any invitation to the public to subscribe for its shares or debentures.
d. It must have at least one director.
e. It must also have at least 1 member.

f. It is entitled to commence business from the date of incorporation.
g. It is not required to publish accounts or hold statutory meetings.
h. It is empowered to give loans to its directors. Characteristics of a public company a public company:
a. Must have a minimum of 7 members.
b. Must have at least 2 directors.
c. Its shares must be freely transferable.
d. It must hold a statutory meeting (AGM)
e. It requires a certificate of trading to commence business or exercise borrowings powers (This is after getting the certificate of incorporation)
f. If quoted it must publish its annual accounts.
g. It may not give loans to its directors.
Advantages of a private company over a public company
i. Subscription. The formation of a private company requires only a minimum of two subscribers to the memorandum of association. This makes the choice of such companies most suitable for family or friendly concerns. Whereas a public company requires a minimum of seven subscribers to the memorandum of association.
ii. Commencement of business. A private company may commence business immediately after incorporation, and allot shares whereas a public company with share capital cannot commence business as such till has been issued with a trading certificate.
iii. Statutory meeting. A private company is not required to hold a statutory meeting or send statutory reports to its members.
iv. Exemption from prospectus. Issuing of prospectus is prohibited. A private company is, therefore exempt from all requirements of the Act relating to the prospectus.

v. Directors. Where the articles appoint directors, they do not have to file with the registrar consent to act or undertaking to take qualification shares.
vi. A private company shall have at least one director and a public company two directors.
vii. A private company does not need to keep an index of members.
viii. Annual accounts.A private company is exempted from publication of its annual accounts in the local dailies. This is the statutory obligation of a company.
3. Whether liability is limited shares or guarantee.
Companies formed for trading purposes have their liability limited shares while those formed for non-commercial purposes have their liability limited guarantee.
4. Whether or not the company has share capital.
Shares are the units into which the company’s capital is divided. They are the units of ownership. Whether a company has share capital depends on:
a. The intention of promoters.
b. Limitation of liability. A company limited shares must have share capital. A company limited guarantee may or may not have share capital. On the other hand an unlimited company may or may not have share capital.
Section13-16 of the Act prescribes the minimum conditions in company formation.
Under it any 7 or more persons or if the company to be formed is public, any 1 or more persons if the company is private may, subscribing their names to a memorandum of association and complying with the provisions of the Companies Act relating to registration, form an in corporated company with or without limited liability.

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