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company law

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA LW Exams › company law

  • This topic has 3 replies, 2 voices, and was last updated 9 years ago by MikeLittle.
Viewing 4 posts - 1 through 4 (of 4 total)
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  • May 24, 2016 at 2:54 pm #316842
    peshy
    Participant
    • Topics: 21
    • Replies: 29
    • ☆☆

    Hie Mr Mike

    what’s the difference between liability limited by shares and liability limited by guarantee ?

    May 24, 2016 at 4:56 pm #316859
    MikeLittle
    Keymaster
    • Topics: 27
    • Replies: 23316
    • ☆☆☆☆☆

    where a limited company is created the liability of the members may be limited by guarantee (only available for private companies) or it may be limited by shares

    liability limited by shares – if the liability of the members is limited by shares, this means first of all that a member’s liability is limited and secondly that we shall use that member’s shareholding to compute any liability that exists

    However, a limited company cannot ask for more money from its shareholders that the nominal value of the shares held by that member and if the shares are “fully paid” then that member has no further liability

    liability limited by guarantee – if the liability of the members is limited by guarantee, this means first of all that a member’s liability is limited and secondly that we shall use that member’s guarantee (given by the member at the time they acquired their interest in the company) to compute any liability that exists

    Typically a member will guarantee that, in the event of an insolvent liquidation, the member will guarantee to contribute $X into the company to help to pay off its debts

    In that situation, the liquidator can ask all the members to pay money up to the amount they have guaranteed but their liability is limited by that figure – that’s the MOST that they may have to pay up

    Now the kicker! It is normal in a private company limited by guarantee to ask the members to guarantee an amount. So members do. And the amount that they normally guarantee is just $1

    OK?

    May 26, 2016 at 2:54 pm #317219
    peshy
    Participant
    • Topics: 21
    • Replies: 29
    • ☆☆

    well explained ,thank you

    May 26, 2016 at 3:42 pm #317224
    MikeLittle
    Keymaster
    • Topics: 27
    • Replies: 23316
    • ☆☆☆☆☆

    You’re welcome

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