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

Kestrel Ltd goes into insolvent liquidation owing 500,000 to trade creditors. Its shareholders each hold fully paid shares, and no personal guarantees were given and no fraud occurred. What is the shareholders' liability for the debts?

The shareholders owe nothing further. In a company limited by shares, members' liability is limited to any amount unpaid on their shares, and these are fully paid, so creditors cannot pursue shareholders personally without a guarantee or grounds to lift the veil.

  1. ALimited to any unpaid amount on their shares, which here is nilCorrect
  2. BEach shareholder is liable for a proportion of the 500,000 in proportion to shareholding
  3. CUnlimited, because the company's debts are the debts of its owners

Explanation

A company limited by shares gives members limited liability: they risk only the unpaid amount on their shares. The shares are fully paid, so there is nothing more to contribute. Absent guarantees or veil-lifting grounds, creditors must bear the shortfall.

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