ACCA Applied Skills · Corporate and Business Law (Global) · The formation and constitution of a company
Kestrel Ltd is a company limited by guarantee without share capital. Its members each guaranteed to contribute 500 if the company is wound up. Which statement is correct?
A guarantor member's liability is limited to the 500 guaranteed and is payable only if the company is wound up. Members do not pay while it trades, and they are not liable for all debts without limit.
- AEach member must pay 500 to the company while it is still trading
- BEach member's liability is limited to the 500 guaranteed, payable only if the company is wound upCorrect
- CEach member is liable for all of the company's debts without limit
Explanation
In a company limited by guarantee, members undertake to contribute a stated sum only on winding up. Liability is capped at that amount. It is not payable during trading, and it is not unlimited, which is the position in an unlimited company.
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