Meaning of limited company (what is it, concept and definition)

What is the Corporation:

A corporation is a commercial company with legal personality, in which the capital is divided according to the contributions of each partner.

The name of said company must include the indication of “Sociedad Anónima” or the abbreviations “SA". In some countries, this type of company is usually called Sociedad Anónima de Capital Variable , and is abbreviated as follows: SA de CV

The capital of said company is distributed through shares that confer on its owner the status of partner.

The fundamental characteristic of the corporation is that the partner only contributes the capital and does not personally respond to the social debts, risking only the contribution of the subscribed shares without compromising their social assets.

This means that the social obligations are guaranteed by a certain capital and the partners are bound by the amount of their share.

The shares grant economic and political rights within the company to the shareholders, who differ from each other by the nominal value of the shares or the types of rights granted by each share.

Incorporation of a corporation

To form or establish a corporation, a public deed must be made with its so-called statutes, as provided for in the commercial code of each country. A corporation is made up of three bodies:

• the general meeting of shareholders or general assembly of partners, the administration of the company, and the supervisory board.

Likewise, a minimum of partners or shareholders and a minimum of share capital or capital subscription must be determined. The document establishing the corporation must establish the statutes clearly, objectively and in detail.

In Mexico, the corporation is governed by the General Law of Mercantile Companies and, in Spain, by the Law of Capital Companies .

General meeting of shareholders or general meeting of partners

The general meeting of shareholders or general meeting of partners is the organ of administration and supervision of the corporation. The meeting is held in an ordinary or extraordinary way.

Ordinary meetings are held once a year to discuss financial matters, dividend distribution, appointment of new directors, among other points; extraordinary meetings are held as a matter of urgency when the board or partners request it to discuss issues that justify the interests and future of society.

Society administration

The administration of the company is the representative body of the company and they are in charge of the executive part of the company.

Supervisory council

The Supervisory Board is the entity responsible for supervising the administrators.

See also:

• Mercantile company.

Advantages of a corporation

The corporation is one of the ways to set up a company since there are others such as the limited liability company or cooperative society, each with its advantages or disadvantages. Some of the advantages of the corporation are:

• The liability of the partners is limited by their contributions; the creditors have a right to the assets of the corporation and not to the personal assets of the shareholders; the transfer of the shares can be done through the sale without the need to dissolve the incorporated company; no contemplates a maximum number of partners.

Disadvantages of a corporation

Similarly, the following aspects can be observed as disadvantages of the public limited company:

• cumbersome procedures, high costs for its constitution, decision-making is usually slow, since there must be a prior debate with the shareholders' meeting, which is followed by a vote.

Types of corporation

Closed corporation

The closed corporation is characterized by being made up of less than 20 shareholders. It is not registered in the Public Registry of the Stock Market.

Likewise, the closed corporation does not resort to public savings; their contributions are purely private as they come from the founders of the company.

Open stock company

The public limited company is identified by resorting to public savings in search of financing, either to constitute capital or to increase it. It also seeks to register its shares in the Public Securities Registry in order to list the shares on the stock exchange.

Difference between corporation and partnership

The partnership differs from the corporation in that the liability is unlimited, that is, in the event that the assets of the partnership are insufficient to cover the payment of a debt, the partners must answer with their own assets for the payment of The duty.

That is why the partnership has gradually disappeared due to the lack of a limit of liability on the part of the partners or shareholders.