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ACCA Applied Knowledge · Business and Technology · The purpose and types of business organisation

Anna holds 1,000 shares in Delta Co, a company limited by shares, each issued at $1 and fully paid. Delta Co goes into insolvent liquidation with large unpaid debts. What is Anna's maximum liability to Delta Co's creditors in respect of her shareholding?

Anna's further liability is nil. Limited liability means a shareholder only has to pay any amount unpaid on the shares. Because her shares are fully paid, she owes creditors nothing more, although she may lose the $1,000 she has already invested.

  1. ANilCorrect
  2. B$1,000
  3. CThe full amount of Delta Co's unpaid debts
  4. DHer share of the debts, in proportion to her holding

Explanation

Limited liability restricts a shareholder's loss to the amount unpaid on their shares. Anna's shares are fully paid, so nothing further is owed. The $1,000 is her investment already made and potentially lost, not an additional liability.

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