Shareholders and directors are not usually liable for company debts that exceed the nominal value of their shares or the sum of any personal guarantees they have given. This is because companies limited by shares are incorporated as separate legal entities with their own identity, so they are responsible for their own actions and debts.<\/p>\n
In turn, shareholders and directors enjoy limited liability for the actions and debts of the business, which is one of the most significant benefits of setting up a limited company<\/a>.<\/p>\n The liability of shareholders is limited to the \u2018nominal\u2019 value of the shares they take in the company. Typically, the nominal value of a share is set at \u00a31, thus minimising the personal financial liability of shareholders if the company fails and can\u2019t pay its own debts.<\/p>\n Example 1 <\/strong><\/p>\n Example 2<\/strong><\/p>\n Example 3 <\/strong><\/p>\n Example 4<\/strong><\/p>\n Most of the time, shareholders pay for their shares immediately. In such instances, the shareholders will not have any further liability to the business.<\/p>\n It is also possible, however, for shares to be taken unpaid or partly paid. In these circumstances, the shareholders are obligated to pay the outstanding nominal value of their shares when the company \u2018calls up\u2019 (i.e. demands payment of) the unpaid share capital.<\/p>\n This usually happens if the business becomes insolvent or is wound up, but sometimes shareholders are simply given more time to pay for their shares if immediate payment would be a barrier to investment.<\/p>\n What is the liability of company shareholders?<\/h3>\n
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