ACCA Applied Skills · Corporate and Business Law (Global) · Corporations and legal personality
Amara incorporates Zenith Ltd and is its sole shareholder and director. Zenith Ltd signs a supply contract and later fails to pay the supplier. Which statement is correct?
Zenith Ltd alone is liable for the unpaid debt. A registered company has separate legal personality distinct from its members, so Amara's status as sole shareholder and director does not make her personally liable for the company's contracts.
- AAmara is personally liable for the debt because she is the only shareholder
- BZenith Ltd is liable for the debt, as it is a separate legal person from AmaraCorrect
- CAmara and Zenith Ltd are jointly liable because there is only one member
Explanation
A company is a separate legal person from its members (Salomon v Salomon). A sole shareholder-director is not liable for the company's contract debts merely because she owns all the shares. The supplier can only claim against the company, so the other options wrongly ignore separate personality.
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