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ACCA Applied Skills · Corporate and Business Law (Global) · Corporations and legal personality

Delta Ltd is a company limited by shares whose sole shareholder, Mr Okoye, also runs its business. Delta Ltd goes into insolvent liquidation owing creditors 500,000, and Mr Okoye has paid up all his shares in full. Absent fraud or personal guarantees, what is Mr Okoye's liability?

Mr Okoye has no further liability. A company limited by shares is a separate legal person, and a member's liability is limited to any unpaid amount on his shares. His shares are fully paid, and being sole owner does not remove that protection absent fraud or guarantees.

  1. AHe is liable for all 500,000 because he is the only shareholder
  2. BHe is liable for half of the debts as the controlling owner
  3. CHe has no further liability for the company's debtsCorrect
  4. DHe is liable only if the company has fewer than two members

Explanation

A company limited by shares has separate legal personality and members' liability is limited to the unpaid amount on their shares. The shares are fully paid, so nothing more is owed. Being the sole shareholder does not remove limited liability.

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