Liability of Members in a Company Limited by Guarantee

A company limited by guarantee is a type of company in which the members' liability is limited to a certain amount that they agree to contribute to the assets of the company in the event of its winding up. This type of company is commonly used by non-profit organizations, clubs, or associations.

The liability of the members in a company limited by guarantee is different from that of a company limited by shares. In a company limited by shares, the liability of the members is limited to the unpaid value of their shares. However, in a company limited by guarantee, the liability of the members is limited to a guarantee amount that they have agreed to contribute to the assets of the company in case of its winding up.

Guarantee Amount

The guarantee amount is the amount that the members agree to contribute to the assets of the company in the event of its winding up. This amount is usually specified in the company's articles of association. The guarantee amount can be any amount that the members agree upon, but it is usually a nominal amount, such as one pound or one dollar.

Unpaid Value of Shares

The unpaid value of shares is the amount that a shareholder has not yet paid for their shares. In a company limited by shares, the liability of the shareholders is limited to the unpaid value of their shares. However, in a company limited by guarantee, there are no shares, and therefore, there is no unpaid value of shares.

Unlimited Liability

Unlimited liability means that the members are liable for all the debts and obligations of the company, and there is no limit to their liability. This type of liability is not applicable to a company limited by guarantee, as the liability of the members is limited to the guarantee amount that they have agreed to contribute to the assets of the company in case of its winding up.

Conclusion

In conclusion, the liability of the members in a company limited by guarantee is limited to a guarantee amount that they have agreed to contribute to the assets of the company in case of its winding up. The members are not liable for the unpaid value of shares, and their liability is not unlimited.

As per section2(92) of the company act,2013 defines- the members are only liable to the extent of the amount guaranteed by them and that too when the company goes into liquidation.