The duties and liabilities of share-holders are of two types
1. Statutory Liabilities
Statutory Liabilities are those which are imposed on the
shareholders by the company’s ordinance, 1984.
2. Contractual Liabilities
Contractual liabilities are those which are laid down in the
article of association of the company.
The important contractual liabilities are as under
i. Call Liability to pay call
A shareholder of accompany limited by shares is liable only
to the extent of amount unpaid on his shares. The term call refers to some installments.
The mode of payment of share money is generally laid down in the Articles of
association of the company. Suppose if the share is of Rs. 100, Rs. 10 on
application, and Rs. 20 on allotment and another Rs. 20 in one month’s time and
the balance when even called for. So each of the above installments is known as
call and the balance is called uncalled share capital.
The directors can make a call for the balance money after
passing a resolution in the Board’s meeting and according to the manner
specified in the Articles. If a call in invalid, the share-holders need not to
pay. A call must be made uniformly and a call made on some members or
share-holders only, is invalid.
ii. Liability of forfeiture
The director has a right granted by the articles to declare
the share of any member or share-holder forfeited. Generally the shares are
forfeited for default to pay on calls or for other valid reasons and with the
sanction of the court.
iii. Surrender
The article of the company empowers the directors to accept
surrender of shares. Surrender of shares means, the reduction of capital.
Partly paid up shares when surrendered would means diminution of capital. Such
surrender is void. Fully paid-up share when surrendered and if accepted in the
interest of the company is valid.
iv. Lien
It means the right of taking into possession of another’s
property for realization of some debts from that another person. The articles
provide that the company shall have first lien on the shares of the members for
their debts and liabilities to the company. If share-holder becomes indebted to
the company prior to the mortgage, the lien of the company will prevail over
the mortgage.
Statutory Liability of shareholders
Following are the liabilities of share-holders
i. Liability of share-holders in respect of reduced
shares
a. A member of the company shall not be liable in respect of
any share to any call or contribution exceeding in amount paid on the shares
and the amount by the shares as fixed by the minutes.
b. Nothing in this section shall affect the rights of the contributions
among themselves.
ii. Liability of share-holders in case 66 Liquidation
a. In the event of a company being wound up, every past or
present share-holder shall subject to the provisions of this section be liable
to an amount sufficient for payment of its debts and liabilities and the costs,
charges and expenses of the winding up and for the adjustment of the rights of
the contributories among themselves with the following qualifications
a-i. A past member shall not be liable to contribute if he
has ceased to be a member for one year or more before the commencement of the winding
up.
a-ii. A past member shall not be liable to contribute in
respect of any debt or liability of the company contracted after he ceased to
be a member.
a-iii. A past member shall not be liable to contribute
unless it appears to the court that the existing members are unable to satisfy
the contributions required to be made by them in pursuance of ordinance 1984.
iv. In case of a company .limited by shares no contribution
shall be required from any member exceeding the amount unpaid on the shears in
respect to which he is liable as a present or past member.
v. In case of a company limited by guarantee, no
contribution shall be required from any member exceeding the amount undertaken
to be contributed by him to the assets of the company in the event of its being
wound up.
vi. Nothing in this act shall invalidate any provision
contained in any policy of insurance or other contract whereby the liability of
individual member on the policy or contract is restricted or whereby the founders
of the company are alone mad reliable in respect of the policy or contract.
b. In winding up a company limited
by guarantee every member of the company shall be liable, in addition to the
amount undertaken to the contributed by him to the assets of the company in the
event of it being wound up, to contribute to the extent of any sum unpaid on
the shares held by him.
Position of a child
as a member
A child may be a
member, subject to his rights to repudiate shares when he attains majority.
However, no application of child can be entertained, as under the contract act,
all contracts of child, except for necessaries, are void. The guardian of a
child may, of course, contract on his behalf but as there may be grounds on which
a child on attaining majority may repudiate his shares, there is some risk in
making allotments in favor of a child.
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