Skip to content

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

Mirabel Co is a company limited by guarantee without share capital. Its constitution states that each member guarantees to contribute 50 if the company is wound up while they are a member or within one year after ceasing to be one. There are 20 members. Which statement is correct?

Each member's liability is limited to the 50 guaranteed, and it is only called upon if the company is wound up. It is not paid on joining, and the absence of share capital does not make liability unlimited, because the guarantee sets the cap.

  1. AEach member must pay 50 into the company on joining, as a fee for limited liability
  2. BEach member's liability is limited to the 50 guaranteed, and it is only called on a winding upCorrect
  3. CEach member is liable for all the company's debts because there is no share capital

Explanation

In a company limited by guarantee, members undertake to contribute a fixed sum only if the company is wound up. The guarantee is not payable on joining or during the company's life. Lack of share capital does not create unlimited liability, since the guarantee caps it at 50 each.

Did you get it right without looking?

One question tells you little. A timed set on Corporations and legal personality shows your real accuracy, how long you take and where you lose marks.

Practise Corporations and legal personalityFree diagnostic mock

More Corporations and legal personality questions