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Hi Mike,
I was wondering if you could clear something up for me?
I have used the Kaplan text for study purposes but am using both Kaplan and BPP revision kits so I get enough question practice and, in the matter of the limit to member’s liability in the event of liquidation, they seem to differ.
Kaplan (both text and revision kit) states that the liability is limited to the unpaid portion of the shares purchased but BPP’s exam kit states that the limit is the amount of share capital purchased. I don’t have the BPP text to check but since the answer is repeated to another question I don’t think it’s a printing error.
Would really appreciate clarification of the correct answer as this is annoying me, it’s the first time the two seem to disagree.
Many thanks,
Jenny
In the event of a liquidation, a member cannot be required to pay in any money that amounts to greater than the amount as yet unpaid (if any) on shares held by them
So, a company already exists and the 100 issued shares of $1 each are credited already as fully paid. The members cannot be required to pay in any more money
A company already exists and the 100 issued shares of $1 each are credited already as 70 cents paid. The liquidator can require the members to pay in 30 cents for each share owned by each member.
In both situations, the maximum that the members can lose is $100 and, in that respect, you could claim that both BPP and Kaplan are correct.
If I had to err one way or the other, I would interpret the word “liability” to indicate that there IS an amount outstanding so my immediate answer would be that a member’s liability is limited to the amount, if any, as yet unpaid on shares held by them
Ok?
Thanks Mike.
I think that the way that Kaplan phrase it is clearer – the BPP answer just threw me as I thought I understood it! Hopefully if it comes up in the exam the examiner will ask it in a clear way.
Thanks for your help,
Jenny
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