What is required for a limited company to re-register as an unlimited company?

What is required for a limited company to re-register as an unlimited company?

• A. Simple majority approval
• B. Ordinary resolution
• C. 100% approval
• D. Special resolution

Answer: (C)

To re-register a limited company as an unlimited company, the requirement is to obtain a special resolution from its shareholders. A special resolution requires a higher level of approval than a simple majority, typically 75% of the votes cast, reflecting a significant consensus among the shareholders for such a fundamental change in the company's structure. The concept behind needing a special resolution is that converting from a limited to an unlimited company represents a significant alteration of the liability that the shareholders face. In a limited company, shareholders' liability is confined to the amount unpaid on their shares, whereas in an unlimited company, shareholders may be personally liable for the company's debts. This shift is substantial enough that it warrants a higher threshold of approval to protect the interests of all stakeholders involved. Therefore, while a choice stating "100% approval" implies an absolute consensus, in legal practice, ordinary decisions can be made with lower thresholds, whereas a special resolution effectively balances the need for careful consideration with the practicalities of corporate decisions. Hence, the correct answer underscores the procedural rigor needed to ensure that shareholders have a robust opportunity to weigh in on such a significant change.

To re-register a limited company as an unlimited company, the requirement is to obtain a special resolution from its shareholders. A special resolution requires a higher level of approval than a simple majority, typically 75% of the votes cast, reflecting a significant consensus among the shareholders for such a fundamental change in the company's structure.

The concept behind needing a special resolution is that converting from a limited to an unlimited company represents a significant alteration of the liability that the shareholders face. In a limited company, shareholders' liability is confined to the amount unpaid on their shares, whereas in an unlimited company, shareholders may be personally liable for the company's debts. This shift is substantial enough that it warrants a higher threshold of approval to protect the interests of all stakeholders involved.

Therefore, while a choice stating "100% approval" implies an absolute consensus, in legal practice, ordinary decisions can be made with lower thresholds, whereas a special resolution effectively balances the need for careful consideration with the practicalities of corporate decisions. Hence, the correct answer underscores the procedural rigor needed to ensure that shareholders have a robust opportunity to weigh in on such a significant change.