Explain liability of members in a company.

1.	Explain liability of members in a company.
Answer» Liability of members: The liability of members is limited to the face value of number of shares he possesses of that company. This means that if a share-holder possesses 50 shares of ₹ 100 each then his total share in that company is of ₹ 5000. If the company goes bankrupt the share-holder will lose only ₹ 5000 he invested in the company and he will not be liable for the entire loss of the company. Note that, the concept of unlimited liability is rarely seen in companies. The company in its Memorandum of Association on mentions whether the share-holder will have limited or unlimited liability.

Answer»

Liability of members:

The liability of members is limited to the face value of number of shares he possesses of that company. This means that if a share-holder possesses 50 shares of ₹ 100 each then his total share in that company is of ₹ 5000. If the company goes bankrupt the share-holder will lose only ₹ 5000 he invested in the company and he will not be liable for the entire loss of the company.

Note that, the concept of unlimited liability is rarely seen in companies.
The company in its Memorandum of Association on mentions whether the share-holder will have limited or unlimited liability.

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Explain liability of members in a company.

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