June 12, 2013
I know who I am. Bloody hell, I’m getting enough bills for Karl Pilkington so I hope I am him, ‘cos if I’m not, I have no idea who I’m paying for. – Karl Pilkington, An Idiot Abroad: The Travel Diaries of Karl Pilkington
You are going abroad with your company and have found a market you want to enter in this new and exciting land. However, the designation after the company says “S.A.” In the U.S., we have Corporations, Limited Liability Companies (LLCs), Partnerships (LLP), and Sole Proprietorships; no “S.A.” business designation exists in U.S. Corporate law. You could just Google “S.A.,” but what will you find besides the simple definition of the term?
In this installment of “A Company Abroad,” we present some of the various business organization types you will encounter when dealing with companies abroad. This article should act as field guide for different business types, though not a comprehensive one or a complete comparative study. In order to begin to identify many of these business entities U.S. readers should become familiar with the business organizations recognized under English (Common) Law. English Law provides for business entities like Partnerships (Limited, General, and LLP), Sole Proprietorships, and Companies (PLC, Ltd., and Unlimited companies). While the United States allows Corporations to use different designations for corporations including “Co.,” “Corp.,” “Inc.” and “Ltd.”; under English Law, there are a more limited set of designations for companies: Public or Private and Limited or Unlimited.
Public or Private? Limited or Unlimited?
The 2006 Companies Act defines a “Public” company as a “company limited by shares or limited by guarantee and having a share capital (a) whose certificate of incorporation states that it is a public company and (b) the registration or renewal is after December 22, 1980, and (c) shares are offered to the public to be traded freely. “Offered to the public” means there can be no straw purchases, or the person is already connected to the company in some way (e.g., employees, family members of employees, surviving spouse of employee, creditor, or trustee of a trust for any of the already mentioned people).
“Private,” on the other hand, simply means the company may not offer shares to the public. You may offer shares to employees, family, friends, creditors, and other close relations, if approved by the company’s charter and bylaws. Private companies are penalized (i.e. fined or have other regulatory burdens imposed upon them) if they offer securities to the public, and may be forced to re-register as a public company.
The “Limited” designation applied to a company means the liability or risk to the company, with respect to shareholders and other third parties, is capped at the value of the equity held in the company’s shares, if any, or by guarantee. Limited by shares is a limitation based on the amount unpaid on the shares held by the company. Limited by guarantee limits liability to the amount the members contributed to the assets of the company in the event of the wind-up and dissolution of the company.
Unlimited means there is unlimited liability for its owners. Fun Fact: Land Rover was an unlimited company in the United Kingdom until 2013.
PLC and S.A.
The Public Limited Company (“PLC”) is a type of corporation where a certain amount of the company has to be held by public shares, but is limited in liability. Most companies that need investment through the selling of shares to the public are registered as a PLC in the UK. The PLC has an equivalent in parts Europe, South America, Africa, and North America called Société Anonyme in French, or Sociedad Anónima in Spanish (usually abbreviated S.A.).
Société Anonyme (“S.A.”) just means anonymous company and like its namesake shareholders could anonymously invest were paid dividends without any identification. Like bearer bonds the person holding the share certificate or coupon for dividend could just collect. Governments now require identification due to tax evasion, theft, and criminal activity.
Ltd. and SARL
The Limited Private Company (“Ltd.”) is a company where the shares are not offered to the public and have limited liability. It functions very similarly to a Limited Liability Company (LLC) or closely held corporation. The companies usually are smaller and likely do not have need to offer shares on the open market and act as a liability shield primarily.
Société à Responsabilité Limitée (“SARL”sometimes SÀRL, Sàrl, sàrl or S.à r.l.) means limited responsibility company. There can be only a limited number of shareholders and the corporation may be subject to tax of the home jurisdiction. The shares of a SARL like that of a Ltd. cannot be freely transferred and require the agreement of the shareholders.
Hope you enjoyed this very brief tour around the different types of companies that are out there in the world. As always if you would like to contact me about any of your legal questions or anything related to this article please email me at BradleyS@ExecutiveLP.com or call my office number: (678) 824-2969.
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