What is limited liability clause

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umairahmedpk

  • Jun 12th, 2008
 

Limited liability caluse is mentioned in memorendum of association. Under this clause, it is mentioned that the liability of the members of the company i.e share holders have liability upto their amount payable for the shares outstanding.

This means that every member is liable to the extent of the amount payable against the shares held by him.

Eg. If the purchases the Rs.10 partly paid shares at Rs. 4. Then at the liquidation of the company or when ever company calls for the remaining amount i.e Rs.6 to pay, the holder is liable to pay only Rs.6. The holder will not contribute any further amount even in case of deficiency of funds at the time of liquidation.

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