Source: 3)b)i)4m,MTP2,Sept2025, 1)b)i)4m,MDTP3, RTP,Sept2024, 1(b)i)4m,MTP2,June2024, RTP,Dec20224 Marks
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Question Scenario

Nolimit Private Company is incorporated as unlimited company having share capital of ₹ 10,00,000. One of its creditors, Mr. Samuel filed a suit against a shareholder Mr. Innocent for recovery of his debt against Nolimit Private Company. Mr. Innocent has given his plea in the court that he is not liable as he is just a shareholder. Explain, whether Mr. Samuel will be successful in recovering his dues from Mr. Innocent?

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Suggested Answer

1. Provisions of the Act / Applicable Law

Section 2(92) of Companies Act, 2013, provides that an unlimited company means a company not having any limit on the liability of its members. The liability of each member extends to the whole amount of the company’s debts and liabilities, but he will be entitled to claim contribution from other members. In case the company has share capital, the Articles of Association must state the amount of share capital and the amount of each share. So long as the company is a going concern the liability on the shares is the only liability which can be enforced by the company. The creditors can institute proceedings for winding up of the company for their claims. The official liquidator may call the members for their contribution towards the liabilities and debts of the company, which can be unlimited.

2. Analysis & Application of Facts

On the basis of the above, it can be said that Mr. Samuel cannot directly claim his dues against the company from Mr. Innocent, the shareholder of the company even though the company is an unlimited company. Mr. Innocent is liable for upto his share capital. His unlimited liability will arise when official liquidator calls the members for their contribution towards the liabilities and debts of the company at the time of winding up of company.

Exam Strategy Tip

When answering law questions in the CA Foundation exam, follow the "Provision -> Facts -> Conclusion" structure for maximum marks. Ensure to state the relevant sections where applicable to earn bonus marks from the evaluator.

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