Difference between shareholders and contributory
The below mentioned article provides a brief note on contributories, explained with the help of suitable illustrations. The liability of a contributory extends only to the amount, if any, remaining unpaid on the shares help by him. In the case of a contributory who holds fully paid shares, there is no liability. There is liability only in the case of partly paid shares, to the extent of share amount remaining unpaid. Contributories mean all those persons who are responsible to make payment to the company at the time of its winding up.SEE VIDEO BY TOPIC: Difference between Shareholders and Creditors (Shareholders v/s Creditors)
SEE VIDEO BY TOPIC: Difference between Debenture holder and Shareholder, Accounting Lecture - familylawreformusa.com -Content:
Corporate Laws II Introduction There are several factors makes a company stand apart from any other part of business.
A company has separate legal entity, has perpetual succession, limited liability et cetera. All these and many more factors make a company different from any other form of business. Our writers will create an original "Contributory Liability" essay for you. The term contributory refers to the liability of a person to contribute to the assets of a company. Such a liability is not of relevance when the company is a going concern, it comes into existence or become relevant only when the company ceases to be a going concern that is in the event of the company being wound up.
With respect to the liability of a member in a going company that is before the liquidation of a company or before the company ceases to be a going concern the liability of a member as to contribute is measured by the contractual obligation arising from his membership in the company and in case of a company which is limited by shares the liability is measured with respect or in accordance with the amount to be paid which is limited by the memorandum of association.
The project also tries to discuss the liability and the nature of liability of the contributories in the normal course when the winding up proceedings have been initiated and also in the course when the contributory dies and the legal representative of such contributory are instead made liable to fulfil the liability from the estate of the contributory.
The project also discusses about the contributory liability of an insolvent member. Through this project the author has tried to analyse the relevance and the scope of the word contributory in the companies act using various case laws.
Scope, Objective and Significance The main objective of this project work is to analyse and enunciate about the meaning relevance and the scope of word contributory in the companies act. The scope of the project has been restricted to the scenario which exists in India and the support of various case laws of the Indian courts has been taken in order to do justification with the topic. Knowing about the scope, relevance and meaning of the word contributory is quite significant as it directly relates to the limited liability of a company which is one of the most important feature of a company.
For the same the author has relied upon various books, cases, articles both online and off-line , and online research databases. Research Question What is the meaning of contributory in the companies act? What is the scope and relevance of contributory? After satisfaction of the debts, if there is any balance, it is paid back to the members in proportion to the contribution made by them to the capital of the company.
Once the process of winding up is completed, the company is dissolved. There can be dissolution without winding up under a scheme for amalgamation where the transferor company can be dissolved by an order of the court, without going through the process of winding up. An order of winding up a company does not by itself put an end to its existence although from the commencement of the winding up, the company ceases to carry on the business except required for beneficial winding up. Insolvency is a stage when a company is unable to pay its debt due to financial incompetency or when debts of the company have exceeded the assets of the company.
There are two types of insolvency- personal insolvency and corporate insolvency, but here we are concerned only with the corporate insolvency. Insolvency is one of the grounds for winding up of a company. The relevance of the term contributory refers to every person liable to contribute to the assets of company in the event of its being wound up and includes a holder of any shares which are fully paid-up.
Every member would become a contributory whereas the converse is not true. Mere entry in the register will no longer make a person a member. He must have agreed in writing to become a member, and the burden of proving this will be on the liquidator. But a person who has assented in his being treated as a member by attending meetings, receiving dividends, etc.
A person whose name is present in the register would have to take steps to raise his objections or to have the register rectified, though the courts are very reluctant to order rectification after commencement of winding up.
Thus, where a person who knew that his name was entered in the register of shareholders of a company continued to have it for more than three years and took no action to have it removed from the register till he received the notice from the Official Receiver after the winding up of the company started, it was held that even assuming that the allotment of shares was void yet his application for excluding his name from the list of contributories was rightly dismissed by the court on the doctrine of holding out.
Even where a name is, pursuant to a void contract placed on the register, delay after knowledge may be fatal. Janwi Narainthat when the applicant accepted the offer for allotment of shares and consented to act as director, the contract was completed and, without any allotment, the person became a shareholder.
The fact that the share application money was paid in the form of a promissory note executed in favour of the bank was immaterial. Accordingly, the shareholder was held to be contribution, when the bank went into liquidation. Where an application for shares was subject to a condition to be accepted by the directors and the directors made the allotment but did not fulfil the condition; consequently therefore the allottee obtained a refund order, it was held that his name could not be entered in the list of contributories.
They shall be liable in due course of administration to contribute to the assets. In such case, his rights as a member will vest in his assignee in insolvency who will be the contributory. A shareholder ceases to be a contributory if he is adjudged insolvent. When a company passes into liquidation, a new liability arises and the shareholder becomes a contributory subject to the statutory liability under respective section and in the manner defined by it.
The liability which the statute imposes, affects every member who has not paid the full amount remaining unpaid on his shares and he is required to contribute to the assets of the company to the extent of the amount so remaining unpaid. Section  provides that after a winding up order is made, the Tribunal may at any time pass an order requiring any contributory for the time being on the list of contributories to pay any money due to the company, from him or from the estate of the person whom he represents.
Any money required to be paid by such representatives shall be out of the estate only. In the case of an unlimited company, the Tribunal may allow the contributory to set off any money due to him or to the estate which he represents, from the company, on any independent dealing or contract with the company. But any money due to him as a member of the company in respect of any dividend or profit cannot be set off.
Nature of Liability of Contributory The liability of a contributory extends only to the amount, if any, remaining unpaid on the shares held by him. In the case of a contributory, who holds fully paid shares, there is no liability.
There is liability only in the case of partly paid shares, to the extent of share amount remaining unpaid. Though the liability is a debt, the liability to pay the debt arises only if and when calls are made, and even then, only to the extent of the amount called. Where the unpaid share money has been mortgaged, this does not give the mortgagee a direct right to call upon the contributories to pay that money. He has to ask the liquidator to call upon the members to pay and then to handover the proceeds to the mortgagee.
In this respect there is no difference whether the call is by directors or by a liquidator. The liability is limited and extends only to such amount of share which are unpaid.
If a shareholder has fully paid up shares then even if he is in the list of the contributories he is not liable to pay any amount as the shares are fully paid up. It is now a judicially well-established position that a fully-paid holder of shares is a contributory. A fully paid shareholder will not, however, be placed on the list of contributories, as he is not liable to make any contribution to the assets, except in cases where on distribution of surplus assets he has received a large sum of money and he should repay a portion of that money where later it was found that a debt due to inland revenue was not paid earlier.
In case of a company which is a going concern, this liability is decided on the basis of the contractual terms on whose basis the membership is granted to the member.
The contributory liability shifts can shift like in case of a deceased person, the liability shifts from the deceased person to the legal representative of that person.
A member does not become a contributory until the winding up. Thus, the liability of a contributory is directly related to the limited liability facet of the company form of business. Narasa Reddy v. Official Receiver Sree Films Ltd. Behar Engineers and Contractors Ltd. Asthana 2 Com Cases  L.
Reddi v. Official Receiver, Sree Films Ltd. Pandit Yogeshwar, 11 Com Cases , Lah. In Re, 19 Ch D Asthana, 2 Com Cases  Niemann v. Satish Chandra Chakravarty 13 Com Cases Jagraon Trading Syndicate 6 Com Cases Ramanathan Chettiar 32 Com Cases Mad. We will send an essay sample to you in 2 Hours. If you need help faster you can always use our custom writing service. Our writers will create an original "Contributory Liability" essay for you Create order.
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Search also in: Web News Encyclopedia Images. See also: contributory negligence , contributor , contribution , contribute. When economic outlook remains uncertain, top management complains about the parsimony of expense reimbursements.
It is a process by which the business of the company is wound up, and the company ceases to exist anymore. Thus the company loses its corporate status and existence. All the assets of the company are sold, and the proceeds collected are used to discharge the liabilities on a priority basis. Winding up is a very complicated procedure. Once winding up commences, the Board of Directors go out of the picture and a liquidator takes charge.
Read this article to learn about the persons liable and lists of contributories of a company. A member of a limited company shall be liable to contribute the unpaid amount of shares on which he is a contributory, or the amount he has guaranteed to pay in the event of winding-up. A past member is also liable to contribute if he ceased to be a member within one year before the commencement of winding- up and the present members fail to meet their liabilities. But a past member is not liable to contribute if he has ceased to be member for the year or upwards before the commencement of winding-up. It must be remembered that a past member is not liable after he ceases to be a member. At the same time, a past member is not liable to pay provided the present members fail to contribute the fullest extent. The legal representatives of a deceased member shall be liable to contribute to the assets of the company if a contributory dies either before or after he has been placed on the list of contributories.
Difference Between Members and Shareholders
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Corporate Laws II Introduction There are several factors makes a company stand apart from any other part of business. A company has separate legal entity, has perpetual succession, limited liability et cetera. All these and many more factors make a company different from any other form of business. Our writers will create an original "Contributory Liability" essay for you.
Contributories of a Company: Persons Liable and Lists
.SEE VIDEO BY TOPIC: DIFFERENCE BETWEEN MEMBERS AND SHAREHOLDERS
Contributories: Meaning, List and Problems