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

Oakfield Society is a company limited by guarantee. Its members each guaranteed to pay 50 if it is wound up. It has 200 members, and on winding up has debts exceeding assets by 40,000. It has no share capital. What is the maximum the members can be required to contribute in total, and why?

The maximum is 10,000, being 200 members times the 50 guaranteed. A guarantee company's members are liable only for the guaranteed sum on winding up, so the remaining 30,000 of the shortfall is borne by creditors.

  1. A40,000, because members must cover the whole shortfall
  2. B10,000, because each member's liability is limited to the 50 guaranteedCorrect
  3. CNil, because a guarantee company's members have no liability
  4. D20,000, because liability is limited to half the shortfall

Explanation

Members of a guarantee company are liable only up to the amount guaranteed, and only on winding up. Maximum is 200 x 50 = 10,000. The shortfall of 40,000 exceeds this, so the remaining 30,000 falls on creditors. Option A ignores the cap.

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