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NEITHER SHAREHOLDER NOR “DIRECTOR” CAN BE HELD PERSONALLY ACCOUNTABLE FOR THE COMPANY'S ACTIONS

 
 
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NEITHER SHAREHOLDER NOR “DIRECTOR” CAN BE HELD PERSONALLY ACCOUNTABLE FOR THE COMPANY'S ACTIONS
by System Administrator - Tuesday, 15 March 2016, 3:03 AM
 

By: M.S.Yatnatti: Editor and Video Journalist Bengaluru: Limited Liability:The liability of the members of the company is limited to contribution to the assets of the company upto the face value of shares held by him. A member is liable to pay only the uncalled money due on shares held by him when called upon to pay and nothing more, even if liabilities of the company far exceeds its assets. On the other hand, partners of a partnership firm have unlimited liability i.e. if the assets of the firm are not adequate to pay the liabilities of the firm, the creditors can force the partners to make good the deficit from their personal assets. This cannot be done in case of a company once the members have paid all their dues towards the shares held by them in the company. A limited liability company is a separate legal entity to its shareholders and directors: unless there is proof of fraud or evidence of corporate manslaughter, neither shareholder or director can be held personally accountable for the company's actions. A sole trader is held personal liable for his business borrowings and to any creditors if his business fails. He will also be held personally liable for any claims that are not covered by insurance (read the small print very carefully). Running a business via a limited company looks more impressive: you simply look like a bigger operation. For a tax comparison see Sole trader v. limited company: tax. This comparison is though based on UK context helpful to understand A limited liability company and sole proprietor enterprises . In Britain, a company whose shareholders are responsible for paying debts up to the amount of their unpaid shares, if the company goes bankrupt. "Limited by shares" means that the company has shareholders, and that the liability of the shareholders to creditors of the company is limited to the capital originally invested, i.e. the nominal value of the shares and any premium paid in return for the issue of the shares by the company.