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

Ravenhill Ltd is an unlimited company with three members who each hold equal shares. It goes into insolvent liquidation with debts exceeding assets by 90,000. Assuming the members' contributions are enforced as the law provides for an unlimited company, which statement is correct?

The members must contribute to meet the 90,000 shortfall without any upper limit. In an unlimited company, separate personality remains, but members' liability to fund debts on winding up is not capped by their shareholding or any guarantee.

  1. AEach member's liability is capped at the nominal value of their shares
  2. BOnly the directors are liable for the shortfall
  3. CThe members are liable to contribute to meet the shortfall, without any upper limitCorrect
  4. DMembers are liable only if they have personally guaranteed the debts

Explanation

In an unlimited company the members have no limit on their liability to contribute to the company's debts on winding up. The company still has separate legal personality, but the members must fund the shortfall. A cap at nominal value applies only to limited companies.

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