Liability of member

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Dipak Soni

Dipak Soni (Querist)
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13 April 2013 Liability of MEMBER in a limited company is unlimited?

Gorav Kumar Goyal

Gorav Kumar Goyal (Expert)
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13 April 2013 liability of member is only up to extent its share capital portion.

Ajay Mishra

Ajay Mishra (Expert)
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15 April 2013 9.5 Limited Companies
In such types of companies, the liabilities of members are always limited subject to some exceptions.
9.5.1 Companies limited by shares
These types of companies are quite common in commercial, trading and industrial world. Such companies are characterised with an authorised share capital of a certain amount, which is divided into units of definite sum called shares. The authorised share capital may comprise of more than one kind of shares, viz. ordinary or equity shares (voting and non-voting) and preference shares. The liability of each member of such company is limited to the unpaid amount of shares and premium, if any, held by him.
9.5.2 Companies limited by guarantee and having share capital
Such a company by way of undertaking in its Memorandum of Association restricts the liabilities of its members to a certain fixed amount, for payment of the debts and liabilities of the company in the event of winding up. The members are liable only for the amount contracted before he ceased to be a member or payment of the debts and liabilities within one year after he ceased to be a member. Such companies may also have share capital whenever necessary. In that event, the members will be liable for the amount, if any, remaining unpaid on the shares subscribed by them, in addition to the above guaranteed amount.
9.5.3 Companies limited by guarantee without having share capital
Companies limited by guarantee without having share capital are exactly similar in nature to the guarantee companies as referred above except that there will be no share capital. The members will be liable, in the circumstance referred to above, to contribute an amount not exceeding the sum specified in the Memorandum of Association.

9.6 Unlimited Companies
Such types of companies are analogous to that of partnership firm in respect of the liability of a member. Every member in such a company is jointly and severally liable for all the debts and liabilities of the company.

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