I n t e r a c t I v e t e X t foundations in Accountancy/ acca financial accounting (ffa/FA) bpp learning Media is an acca approved Content Provider

for the amount paid for their shares. They are not responsible for the company's debts unless they have 

given personal guarantees (of a bank loan, for example). However, they may lose the money they have 

invested in the company if it fails. 

Shareholders may be individuals or other companies.

 

Limited liability companies are formed under specific legislation (eg in the UK, the Companies Act 

2006). A limited liability company is legally a separate entity from its owners, and can confer various 

rights and duties. 

There is a clear distinction between shareholders and directors of limited companies. 

(a) 

Shareholders are the owners, but have limited rights as shareholders over the day to day running 

of the company. They provide capital and receive a return (dividend). 

(b) The 

board of directors are appointed to run the company on behalf of shareholders. In practice, 

they have a great deal of autonomy. Directors are often shareholders.  

The reporting requirements for limited liability companies are much more stringent than for sole traders 

or partnerships. In the UK, there is a legal requirement for a company to:  

 

Be registered at Companies House; 

 

Complete a Memorandum of Association and Articles of Association to be deposited with the 

Registrar of Companies; 

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