In this post and the ones following, we are going to look at the language of limited companies. What is a limited company? Let’s think about the language.

If something is ‘limited’, it usually means that something is restricted in size, quantity, number, and so on. In other words, there is an amount of something and then it stops.

In relation to companies, what is ‘limited’? The answer to this question is ‘liability’. What does liability mean? Essentially, it means legal responsibility for something. To be liable for something means to be legally responsible for something. For example, if you drive your care carelessly and harm someone else or damage someone else’s property, you will be liable for the harm or damage you have caused. In other words, you will be legally responsible for it.

As we will see, there are different kinds of limited companies in the United Kingdom. For example, a company can be a ‘public limited company’ (PLC) or a ‘private limited company’ (Ltd). The bottom line is, if a company has ‘limited liability’ status, it means that the company has a legal status of its own (a legal status which is independent from the people who own it. In other words, it is a ‘corporation’ (a body). We will talk about the owners in a moment.

The fact that a company has ‘limited’ status gives it several advantages: in particular, financial advantages. There are also some disadvantages. We will look at some of these pros and cons later.

One of the advantages of being a limited company, with its own, independent, legal personality, is that it can bring legal proceedings (or ‘sue’) in its own name. The other side of the coin is that a limited company can also be sued in its own name.

The main source of company law which applies to limited companies in the United Kingdom is the Companies Act 2006. In relation to the taxation of limited companies, the main pieces of legislation are the Corporation Tax Acts of 2009 and 2010, and the Taxation of Chargeable Gains Act 1992 (which has been amended).

As we will see, companies are ‘formed’ (or ‘incorporated’) by a registration process. The Companies Act 2006 governs this process.

Companies can be ‘limited’ in different ways. For example, they can be:

· Limited by shares. In fact, most companies are limited in this way;

· Limited by guarantee

In relation to being limited by shares, this refers to the liability of the members (or ‘shareholders’) of the company for the company’s debts if it goes into liquidation.

What is a ‘share’?

A share represents a piece of a limited company which is owned. It is part of a company’s ‘capital’. ‘Capital’ is the wealth or assets of a company (or, in fact, an individual). Company ‘shares’ represent the ownership of a piece of a limited company. Companies issue shares, and the people who buy them are called ‘shareholders’. If you are a shareholder, you essentially own a piece of the company. If you are a shareholder, however, your liability for the debts of the company are limited; for example, if the company goes into liquidation.

When a company issues shares, the person buying the shares will usually pay for them immediately. These shares are then called ‘paid-up’ shares. Sometimes, the shares are not paid for immediately. These shares are called ‘unpaid’ shares (or ‘nil-paid shares’).

In the next part, we will look more closely at some important features of company (or ‘corporate’) liability (legal responsibiity).


‘the bottom line’ – This is an expression which means ‘the most important thing or things.’

the pros and cons (of something) – ‘Pros’ are advantages. ‘Cons’ are disadvantages.

to sue – This means to bring legal proceedings against somebody. It is used to refer to civil proceedings and not, for example, criminal proceedings.

the other side of the coin – This means the opposite side of a matter or issue.

pieces of legislation – ‘Legislation’ (laws passed by the government through ‘Acts of Parliament’) only has a singular form. We do not say, for example, ‘legislations’. If we want to refer to several Acts of Parliament, for example, we can say ‘pieces of legislation’.

debts – A debt is an amount of money borrowed from another person. If you borrow money, you owe them money. The money that you owe them is called a ‘debt’.

to go into liquidation – If a company cannot pay its debts (the amount of money it owes to people) it may have to ‘go into liquidation’. This means that the company’s assets (the things it owns) must be sold to pay those debts. The company then closes down.


Choose one of the words from the choices given to complete the following sentences.

1. If you owe money to people (in other words, if you have debts), you are called a ………………………………… [debted/debtable/debtor]

2. If you are legally responsible for something, we say you are liable ……… [to/for/in] something.

3. If something, such as a situation, has advantages and disadvantages, we can call the advantages ……… [pros/pers/propos] and the disadvantages …………….. [contras/cons/contrasts]

4. If you own shares in a limited company, you are called a …………………………… [shareowner/sharer/shareholder]

5. If you are owed money by someone, you are a …………………………….. [creditable/creditholder/creditor]



1. debtor

2. for

3. pros/cons

4. shareholder

5. creditor

Note: This post is intended for educational and study purposes only. It is not intended to be a source of legal advice. If you need legal advice, you should consult an appropriate lawyer or legal advisor.

(c) Cambridge Legal English Academy 2020

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