Liability of the Shareholders

Liability of the Shareholders

Liability of the Shareholders

Shareholders are an individual, group, or organization that owns one or more shares in a company and in the whole name the share certificate is issued. They have some liabilities for the companies. Liability of the shareholders is created in two ways:

  1. Liability by the Companies Act
  2. Liability by the Articles of Association.

Some special liabilities of the shareholders are given below:

Collection of shares: They have to collect their issued share at right time.

Transferred Unpaid Share: If any shareholder transfer share to another, the transferor is liable for the payment of the share.

Cheat: If any shareholder is cheated by the company that made any fault he/she will not liable for that fault.

Enlisting in the book of share: They have to be enlisted in the book of share to know the liabilities and responsibilities as a shareholder.

Payment: It is the liability of the shareholder to pay the price of the share and become the owner.

Pay unpaid shares: At the time of dissolution, shareholders are to be liable for the unpaid price of the share.

Liability by agreement: The most common way that a shareholder becomes liable for the company’s debts is by guarantying the debt. That guarantee is a contractual agreement that makes the guarantor personally liable to the company’s creditor on that debt.

Trade creditors: Creditors may sometimes “pierce the corporate veil” to impose liability on the shareholders where the shareholders have neglected corporate formalities such as corporate meetings and required fillings. This can occur if the shareholders intermingle their money with that of the company or identify themselves as the business owner, suggesting that the business is a proprietorship.

Governmental entities: In some cases the state the federal law makes the shareholders liable for the company’s employment taxes, sales taxes or for uninsured worker’s compensation claims.

Finally, it can be said that shareholders are liable to meet up all the requirements as a shareholder and the board of directors are liable to the shareholders.