1.2 Types of companies

The Companies Act of 2015 recognizes five types of companies;

1. Companies Limited by shares
2. Companies limited by guarantee
3. Unlimited companies
4. Private companies
5. Public companies

1. Limited companies

For the purposes of the Act-2015, a company is a limited company if it is a company limited by shares or by guarantee.

For the purposes of this Act, a company is a company limited by shares if the liability of its members is limited by the company’s articles to any amount unpaid on the shares held by the members.

The liability of the members of an existing company is taken to be limited by the company’s articles to any amount unpaid on the shares held by the members if a condition of the memorandum of association of the company stating that the liability of the members is limited is regarded as a provision of the articles by virtue of section 70.

A company is a company limited by guarantee if;-

(a) it does not have a share capital;

(b) the liability of its members is limited by the company’s articles to the amount that the members undertake, by those articles, to contribute to the assets of the company in the event of its liquidation; and

(c) its certificate of incorporate states that it is a company limited by guarantee.

The Act however does not prohibit a company limited by guarantee from having a share capital if it was formed and registered before the commencement of relevant section.

2. Unlimited companies

For the purposes of the Act-2015 , a company is an unlimited company if —

(a) there is no limit on the liability of its members; and

(b) its certificate of incorporation states that the liability of its members is unlimited.

(c)incase the company is liquidated the personal assets of the members can be attached to be utilized for payment of liabilities.

(d)the company will exhibit all the other characterics of a company e.g can wxist into perpertuity, can own property

3. Private company

For the purposes of this Act, a company is a  private company if-

(a) its articles-

(i) restrict a member’s right to transfer shares;

(ii) limit the number of members to fifty; and

(iii) prohibit invitations to the public to subscribe for shares or debentures of the company;

(b) it is not a company limited by guarantee; and

(c) its certificate of incorporation states that it is a private company.

4. Public companies

For the purposes of this Act, a company is a public company if;-

(a) its articles allow its members the right to transfer their shares in the company;

(b) its articles do not prohibit invitations to the public to subscribe for shares or debentures of the company; and

(c) its certificate of incorporation states that it is a public company.

The other categorization of companies are as below;-

1. Corporations Aggregate

Corporations aggregate consist of two or more persons united in a society, which is preserved by a succession of members, either forever or till the corporation is dissolved by the power that formed it. Corporation aggregate can be dissolved by the death of all its members, by surrender of its charter or franchises, or by forfeiture. Such corporations are the mayor and aldermen of cities, the head and fellows of a college, the dean and chapter of a cathedral church, the stockholders of a bank or insurance company.

2. Corporations Sole-EXHIBITS

Corporations sole, consist of only one member at a time, with the corporate character being kept up by a succession of solitary members over time. Corporation sole are always holders of a particular office. For example the office of the presidency, the office of public trustee, the office of the bishop, the attorney general’s office the chief justice office.

3. Statutory Corporation

These companies are incorporated by a special Act passed by the parliament. The constitution and functions of such companies are laid down by the Act of Parliament or any state legislature of Kenya Such companies are generally formed to carry out some special undertakings. The government owns these companies and the main objective of these companies is to provide some necessary services for the benefit of the entire country.

Some examples if statutory companies in Kenya include:

1. Kenya Railways.
2. Kenya Post and Telecommunications Corporations.
3. Kenya Power
4. Kenya Ports Authority

Characteristics s of statutory corporations

1. Each one of them is formed by an act of parliament. Once the act is introduced, the corporation comes into existence as a legal personality with perpetual succession and a common seal.
2. The objects of the corporation are set out in the acts of parliament. It must only act within those objects. If it acts outside the objects, the actions will be untrauires and void.
3. The management is provided for the act. The chairman and board of directors are appointed by the minister responsible for that corporation or by the president. The appointing authority has power to remove such persons.
4. There are no shareholders to the corporation. It is owned by the Kenyan government. It’s funded by the treasury or by the donor guaranteed by the treasury.
5. If the corporation makes a profit, it does not distribute the same to any person. The profits are remitted to the treasury or are used by the corporation to extend its services to the public.
6. If the corporation makes a loss, its assets are liable to attachment and executive by the courts. Therefore the creditors can sue the corporation in its own name to recover any liabilities.
7. The corporation cannot be wound up. A creditor cannot petition for the winding up o the statutory corporation. Its life comes to an end when the act of parliament that created it is or revoked by parliament.

4. Registered Company or Incorporated Companies

A company must be registered under the Companies Act. After registration, the registrar of the companies issues a certificate of incorporation. Such companies come into existence only when they are registered under the Act and the registrar has issued a certificate of incorporation. Such companies derive their powers from the Companies Act and the memorandum of association. Private persons usually form these companies.

Registered companies may be further classified as under:

1. a) A company limited by shares.
2. b) A company limited by guarantee.
3. c) An unlimited company.

5. Chartered Companies

A charted company is formed by a grant of charter by the crown operating under either prerogative powers or special statutory powers. Most chartered companies were formed during the late nineteenth century’s during the scramble for Africa. They were formed with the purpose of seizing, colonizing and administering the last ‘virgin’ African territories. However, these companies proved generally less profitable than earlier trading companies. With time, most of their colonies were either lost (often to other European powers) or transformed into crown colonies.

6. Foreign Companies

Foreign companies are companies incorporated outside Kenya. After establishment of the business in Kenya, it must provide the following documents and information:

• A certified copy of the charter, statutes or memorandum and articles of the company or any other instrument that defines the constitution of the company. If the instrument is not written in the English language, a certified translation should be presented.
• A list of the directors and secretary of the company containing their names address, nationality, any business they undertake and particulars of any other directorship they hold.
• A statement of all subsisting charges created by the company,
• The names and postal addresses of some one or more persons resident in Kenya authorized to accept on behalf of the company service of process and any notices required to be served on the company;
• The full address of the registered or principal office of the company

7. Holding Company

A holding company is a corporation that is organized for the purpose of owning stock in other corporations. A company may become a holding company by;

1. acquiring enough voting stock in another company to exercise control of its operations, or
2. forming a new corporation and retaining all or part of the new corporation’s stock.

While owning more than 50 percent of the voting stock of another company ensures control, in many cases it is possible to exercise control of another company by owning as little as ten percent of its stock.

8. Subsidiary Company

A subsidiary company is one in which another, generally larger company known as the parent company, owns all or at least a majority of the shares. As the owner of the subsidiary, the parent company may control the activities of the subsidiary.