Liability of a member in case of a private company isa)Limitedb)Unlimitedc)Both (a) or (b)d)None of the aboveCorrect answer is option 'C'. Can you explain this answer?

Question

Answer

In the context of company limited by share the liability are limited and there is guaranteed company where the liabilty is limited to the extent of amt guranteed . but there can be a unlinited company also incase registered as such can be held to have unlimited liability

Answer

In case of private company limited by shares liability of members limited upto unpaid value on shares held by them and in case guarantee company liability limited upto guarantee given by members. But in case of unlimited company liability will be unlimited

Answer

Liability of a member in case of a private company:

In the case of a private company, the liability of a member can be either limited or unlimited, depending on the type of company and the agreements made by the members.

Limited Liability:
When the liability of a member is limited, it means that their personal assets are protected in the event of the company's insolvency or debts. The liability of a member is limited to the amount they have invested in the company. This means that if the company fails or faces financial difficulties, the member's personal assets cannot be used to settle the company's debts. The member's liability is limited to the extent of their shareholding or the amount they have contributed to the company's capital.

Unlimited Liability:
In some cases, the liability of a member in a private company may be unlimited. This typically occurs in partnerships or sole proprietorships, where the members are personally responsible for the debts and obligations of the business. In such cases, the personal assets of the member can be used to settle the company's debts. This means that if the company fails or faces financial difficulties, the member's personal assets can be seized to satisfy the company's liabilities.

Both Limited and Unlimited Liability:
In certain situations, the liability of a member in a private company can be both limited and unlimited. This can happen when a member has provided a personal guarantee for the company's debts or obligations. In such cases, the member's liability is limited to the extent of their shareholding or capital contribution, but their personal assets can also be used to satisfy the company's debts if the guarantee is invoked.

Conclusion:
In conclusion, the liability of a member in a private company can be either limited or unlimited, depending on the type of company and the agreements made by the members. It is important for individuals considering becoming a member of a private company to understand their potential liability and to seek legal advice if necessary.

Similar CA Foundation Doubts

The liability of members if company is limited by guarantee.

Which of the following would generally have unlimited liability?

An organisation running a business has the following attributes: the assets belong to the organisation, it can create a floating charge over its assets, change in membership does not alter its existence, and members cannot transfer their interests to non-members. What type of organisation is it?

Flora Fauna Limited was registered as a public company. There are 230 members in the company asnoted below:(

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