Persons Liable as Contributories in Winding up of a Company in India

A past member shall not be liable to contribute:

(a) If he has ceased to be a member for one year or upwards before the commencement of the winding up, or

We Will Write a Custom Essay Specifically
For You For Only $13.90/page!


order now

(b) The debts or any liability of the company was contracted for after he ceased to be a member, or

(c) Unless it appears to the court that the present members are unable to make sufficient contribution towards the amounts due on them and which are required for the payment of liabilities (Sec. 426).

In no case a member of a company, whether past or present, shall be asked to contribute any sum beyond the amount of the unpaid part of the nominal value of the shares subscribed by him or the amount he had guaranteed to pay in the event of a winding up. There will be no limit to the liability of the person to contribute whose liability is unlimited.

3. Directors and managers having unlimited liability:

In case the liability of a director or manager of a limited company is unlimited under the provisions of the company’s memorandum, he shall, in addition to his liability, if any, to contribute as an ordinary member, be liable to make a further contribution as if he were a member of an unlimited company. However,

(a) A past director or manager shall not be liable to make such further contribution if he has ceased to hold office for a year or upwards before the commencement of the winding up; or

(b) A past director or manager shall not be liable to make such further contribution in respect of any debt or liability contracted after he ceased to hold office; or

(c) Subject to the articles of the company, a director or manager shall not be liable to make such further contribution unless the court deems it necessary to require the contribution in order to satisfy the debts and liabilities of the company, and the costs, charges and expenses of the winding up (Sec. 427).

4. Any other person whom the court so directs:

In addition to the above persons, the court may, by its order, impose liability on certain other persons to contribute towards the payment of the liabilities of the company.

(a) Court may declare by its order any person to be liable to contribute to an unlimited extent for all or any of the debts of the company on the ground that such a person was a party to fraudulent trading carried on by the company.

(b) Court may, by its order, compel any person to repay or restore money or property belonging to the company or to make a contribution to its assets as compensation for misfeasance or breach of trust in connection with its affairs (Sec. 542).

In case of death or insolvency or liquidation (if the contributory happens to be a corporate body) of the contributory, the liability of the legal representative or the assignee or the liquidator (as the case may be) shall be the same as that of the original contributory. Their liability as a contributory shall be to the extent of the value of the estate of the original contributory which has come in their control (Sees. 430 and 431).