This article has been written by Mr. Aditya Jain, a student of Maharishi University of Information Technology
According to Section 2(92) of the Companies Act 2013 unlimited Company refers to a company that does not have any restriction on the liability of the company’s members. The shareholders and members are wholly liable to cover the debts of the unlimited company. The liability of every member is spread over the entire sum of the unlimited company’s liabilities and debts, but then again, he is allowed to claim participation from the other members of the unlimited company, in the case of unlimited company.

The liability is comparable to a partner even though the creditors cannot right away initiate lawful proceedings against a particular member in the case of an unlimited company. As per section 32 of the Companies Act 2013 an unlimited company may get itself registered again subsequently as a limited liability company but then again, such change will not have any effect over past debts, liabilities and responsibilities. An unlimited company is not equivalent to a company which is not incorporated, however in both circumstances, the liability that a member has is unlimited.

The distinction between an unlimited company and un-incorporated company is that an unlimited company registered according to the Companies Act has a perpetual succession and is also a legal person with common seal which is capable of suing, borrowing, and getting prosecuted and holding assets in its individual name whereas in case of an association that is un-incorporated, the members on their own have rights in addition to duties and the association in its own capacity as such has no presence as a legal entity. In accordance with the provisions specified in Section 65 of the Companies Act 2013, an unlimited company might get itself changed to limited company. The method for incorporation of the unlimited companies is alike to limited liability companies.

It can well be said that an unlimited liability is the reverse of limited liability. In the case of an unlimited company, the liability which the proprietors and stockholders may possess is not restricted to the sum which they have paid as contribution and as a consequence there is no definite limit to the extent of losses which the proprietors or stakeholders might have to tolerate.

However, there are few solid benefits of investment in a company which is categorized as an unlimited company. There is a widespread saying in financial management, which declares, “the higher the risk, higher are the earnings” and this stands true particularly in the case of the unlimited liability companies.

As the risks which the investors face is huge in case of the investors of an unlimited liability company, there is almost certainty that the investors enjoy a very high degree of returns in the occasion the company accomplishes well. Members and stockholders are wholly liable for the debts of an unlimited liability company. The unlimited company deprives of any limit on the liability of the members, the shareholders or the partners during satisfying the requirements of the unlimited company in wide-ranging facets or debts throughout the official liquidation.

In India, unlimited company according to section 2 (92) of the Companies Act 2013, may be incorporated either with or else without share capital. Unlimited company fetches the members, directors and partners to even apply their private assets while paying the debts and obligations of the unlimited company. Only the liquidators are legally responsible to request the members to make contributions with their private assets as the directors and members of the unlimited company are liable solely to the unlimited company and not to the unlimited company’s creditors. Therefore, members are called only by means of liquidators to apply their private properties for settling the unlimited company’s debt obligations in wrapping up of the unlimited company.

In India, Section 5 of the Companies Act 2013 is of utmost importance. Section 5 of the Companies Act 2013 illustrates that the Articles of a company will comprise of the rules for the administration of the company and that the Articles will be in the form as given in respective Table in Schedule I in the Companies Act, 2013.

What is a limited liability company?
Limited liability implies that the liability of proprietors and the stockholders of a company remains limited to the sum of money that proprietors and the stockholders have invested into the company. As soon as the company is recorded as a limited liability company, the proprietors of the company remain harmless in the occasion, the company becomes bankrupt. In other words, ‘limited liability’ suggests that the proprietor’s losses are limited only to the percentage of their definite share and he or she will not be made accountable for the losses which stand past the share of the proprietor’s contribution. It can be said that ‘Corporation’ is one of the most common sorts of limited liability company.

The owners are the shareholders in a corporation and their liabilities are restricted only to the sum of funds which they have invested in it. In the event, the company files for bankruptcy, at that moment the shareholders will lose only their funds which they have invested in the company. Nevertheless, they shall not be held legally responsible for the losses which are past what they have paid to the firm.

Over and above the advantages, there stand some disadvantages also in this limited liability company. The administrators of limited liability companies are secured against any private liability which means that their possessions cannot be detained for the purpose of paying off the losses. 

The verdict in Salomon v Salomon has recognized the value of a company’s separate legal personality that permits its stakeholders to get away from theindividual liability in the circumstance of a crisis.

Moreover, in the renowned case of VTB Capital Plc v Nutritek International Corporation, court had established the limited room of piercing the veil and only as limited equitable remedy.

In a new verdict of Prest v Petrodel Resources Ltd. Lord Sumption restricted the lifting of veil only to two situations, which are the concealment principle and evasion principle. Consequently, this case detached its attention from the realistic corporate veil and re-established the Salomon v Salomon principle.

Unlimited Company Advantages
Under are the freedoms that the unlimited company has:
 Unlimited company may be registered either with or without a share capital which is one of the chief advantages.
 A special resolution in addition to an application is needed to be submitted for varying its share capital.
 A statutory meeting is not needed in the instance of an unlimited company.
 Section 67 of the Companies Act 2013 does not apply over an unlimited company thus the unlimited company can buy its own shares which is not permitted in the instance of a limited company.
 In the limit calculation, for the of Sections 165 of the Companies Act 2013 purposes, the number of the companies in which an individual might be a director the unlimited company will be left out.
 Compliance of Section 68 of the Companies Act 2013, i.e. the buyback of  the securities will not be applicable and therefore no Capital Redemption Reserve will be required

Disadvantages of an unlimited company:
There is no limit on the liability of the stakeholders and the members for meeting the requirements of the company in diverse aspects or debt obligations all through the path of liquidation.

Reference:
 https://www.company-registration.in/unlimited-company-
india.php#:~:text=Members%20and%20shareholders%20are%20fully,the%2
0debts%20of%20the%20company.
 https://www.businessinsider.in/difference-between-limited-and-
unlimited-company/articleshow/71338690.cms
 https://taxguru.in/income-tax/note-unlimited-liability-company.html
 https://www.mca.gov.in/content/dam/mca/pdf/CompaniesAct2013.pdf
 The Companies Act 2013
 https://lawbhoomi.com/case-brief-salomon-v-salomon/