No Liability Companies

A no-liability company is a limited liability public company whose principal activities are restricted to mining or oil exploration. These companies are called ‘no-liability’ as they are not entitled to calls on the unpaid issue price of shares. This encourages investment in potentially risky mining ventures, as a shareholder with unpaid shares can choose to withdraw from the company with no legal consequences (although they forfeit the unpaid shares).

According to the Corporations Act, a company may be registered as a no liability company only if the following three requirements are met:

• The company has a share capital
• The constitution of the company clearly states that its sole purpose is mining, and
• The company does not have a contractual right to recover calls made on its shares from a shareholder who fails to pay them.