Understanding the Extent of Liability of a Member in a Company During Liquidation: Unpaid Amount on Shares or Guaranteed Amount as Stated by the Member.

Limited to the unpaid amount on shares or the guaranteed amount asstated by the member

Features of a company: (Limited Liability)

The statement “Limited to the unpaid amount on shares or the guaranteed amount as stated by the member” refers to the extent of liability of a member of a company in case of the company’s liquidation or insolvency.

When a person becomes a member of a company by purchasing shares, they become a part-owner of the company. However, their liability towards the company’s debts and obligations is limited to the amount they have invested in the company, i.e., the unpaid amount on shares.

For example, if a person has purchased 100 shares of a company at $10 per share, their total investment in the company would be $1,000. If the company goes bankrupt or is liquidated, the person’s liability towards the company’s debts would be limited to the unpaid amount on their shares, which would be $0 if they have paid the full amount of $1,000.

However, if the company’s articles of association allow for a guaranteed amount, then the member’s liability would be limited to that amount. A guaranteed amount is an amount that a member agrees to pay the company in case of its liquidation or insolvency, as stated in the company’s articles of association.

For example, if the company’s articles of association state that every member must guarantee a minimum of $500 towards the company’s debts in case of liquidation, then the member’s liability would be limited to $500, even if the unpaid amount on their shares is less than $500.

In conclusion, the liability of a member in a company is limited to either the unpaid amount on their shares or the guaranteed amount as stated in the company’s articles of association.

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