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CS Executive · Company Law and Practice · Introduction to Company Law

Anita holds 500 fully paid shares of Kaveri Foods Ltd. The company is wound up with heavy losses and its creditors remain unpaid. What is Anita's liability towards the creditors?

Anita has no further liability to the creditors. In a company limited by shares, a member's liability extends only to the amount unpaid on her shares. As her shares are fully paid, nothing remains payable, though she may lose the value of her investment.

  1. AUnlimited, to the full extent of the unpaid debts
  2. BNil beyond her shares, since the shares are fully paid and nothing remains unpaid on themCorrect
  3. CEqual to the value of her total personal assets
  4. DLimited to the amount of her salary from the company

Explanation

In a company limited by shares, a member's liability is limited to the amount unpaid on the shares held. Her shares are fully paid, so nothing is unpaid and she owes nothing further. Unlimited liability applies to members of an unlimited company, not here.

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