Proprietary limited company

Definition

A proprietary limited company is a legal entity that operates as a separate entity from its shareholders and directors. 

What is a proprietary limited company?

One of the key characteristics of a proprietary limited company is limited liability. This means that the liability of the company’s shareholders is limited to the amount they have invested in the company. In the event of financial losses or legal claims against the company, the personal assets of shareholders are generally protected from being used to settle the company’s debts.

A proprietary limited company is owned by its shareholders, who hold shares in the company. The ownership structure can vary, with some companies having a single shareholder while others may have multiple shareholders.

The day-to-day operations of a proprietary limited company are typically managed by its directors. They are responsible for making strategic decisions, ensuring compliance with laws and regulations, and overseeing the company’s affairs.

Proprietary limited companies are subject to various regulatory requirements and compliance obligations under company law. Failure to meet these requirements can result in penalties or legal consequences for the company and its directors.

As a separate legal entity, a proprietary limited company has the ability to raise capital by issuing shares to investors. This can facilitate growth and expansion opportunities for the company by providing access to additional funds for investment in assets, technology, research and development, and other business activities.

Example of a proprietary limited company

John and Jane decide to start a small software development company together. They choose to register their business as a proprietary limited company to limit their personal liability and protect their personal assets. For example, if the company encounters financial difficulties and is unable to repay its debts, creditors can only pursue the company’s assets, not John and Jane’s personal assets. This structure provides peace of mind to John and Jane while allowing them to pursue their business venture with confidence.