The shareholders of companies hold
liabilities to the company. In simple terms they share the liabilities arising
from the companys’ activities. However, it was assumed without formal provision
that the liability of shareholders in the earliest chartered companies was
limited to the amount of their subscribed contributions, but then in the Ham
borough Company case,[1]
it was finally established
that the creditors of the company could look to the shareholders to be limited
to the amount subscribed. This was the case with unlimited liability companies,
where all shareholders or partners were fully liable without limitation for all
the debts of partnership. In this case often their right to sue and be sued in
the name of their trustees is as result of special rights petitioned for.[2]
The subscribers of the limited liability
companies (private and public) were restricted in their liabilities, as such companies
obtained legal personality separate from its’ individual members. However, this
advantage was not until the principal subject of dispute in the mid-nineteenth
century discussion on company law was centred on the system for liquidation
with full liability for all shareholders, which was adopted in 1844. This
however, was soon shown to be virtually unworkable in the aftermath of a number
of important failures in the later 1840s. Quite apart from the fact that it was
often impossible to ascertain which shareholders would be personally
responsible in the event of failure, since many of them were likely to have
sold or bought their shares after the main loss had been incurred, the effect
of maintaining full personal responsibility for shareholders was thought to
discourage men of substance from buying shares in enterprises in which there
was any degree of risk.[3]
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