Liability In A Limited Company
By Gunjan Sinha, Senior Associate, Dezan Shira & Associates
Apr. 12 – A Limited Liability Company (LLC) in India is said to only bear limited liability for its directors and members as they are only liable for unpaid share capital.
During the process of winding up a LLC, the shareholders must pay back any uncalled or unpaid capital corresponding to the actual number of shares each respective shareholder owns. For example, if a company has a capital base of 10,000 shares worth INR 10 each divided among its shareholders, the shares would be payable as outlined below.
Thus, if the shareholders had previously paid up to the First Call during the winding up of a company, they will then consequently only be liable to pay INR 2 per share.
Similarly, a director’s liability is also said to be limited as per the Companies Act 1956. The company, however, may increase the liability of a director by amending the clauses in the Articles of Association through passing a special resolution in a shareholder’s meeting.
The same clause for making the liability of a director unlimited shall not be applicable to those directors who already hold the post of director before the date of such an alteration, unless they give their express consent.
Dezan Shira & Associates is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in emerging Asia. Since its establishment in 1992, the firm has grown into one of Asia’s most versatile full-service consultancies with operational offices across China, Hong Kong, India, Singapore and Vietnam as well as liaison offices in Italy and the United States.
You can stay up to date with the latest business and investment trends across India by subscribing to Asia Briefing’s complimentary update service featuring news, commentary, guides, and multimedia resources.
An Introduction to Doing Business in India
In this guide, we introduce the basics of setting up and running a company in the country and some of the key issues investors should pay attention to. This issue is currently available as a complimentary download on the Asia Briefing Bookstore.
- Previous Article Key Sectors for FDI in India: Roads and Railways
- Next Article Foreign Direct Investment in Indian Tourism