If a company issues shares unpaid or partly paid to a shareholder (A), and A subsequently transfers the shares to a third party (B) before they are paid up, are A and B jointly and severally liable for the amount unpaid on the shares?

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Published by a ��ɫ�� Restructuring & Insolvency expert

Published on: 17 June 2016

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Background

The nominal value of a share does not need to be paid at the time of issue. shares can be nil paid, partly paid or fully paid although the company’s articles of association may provide that shares must be fully paid up (including any premium). If they are not fully paid a shareholder is liable to pay in full:

•
if the company makes a call on the shares, or
•
if the company is wound up

For further information, see Practice Note: Understanding share capital, in particular the section entitled: Nominal value of shares.

Liability

The Insolvency Act 1986 (IA 1986), s 74 legislates on the liability as contributories of present and past members of a company to contribute to the debts of the company. IA 1986, s 74(1) provides: 'When a company

Jurisdiction(s):

United Kingdom

Key definition:

Shares definition

What does Shares mean?

The CA 2006 merely provides that a share is a share in the company's share capital. A company's share capital comprises the number of shares issued by it to investors either on or after incorporation. Those investors then become the shareholders in the company. A shareholder’s shares are their personal property. By contrast, the assets of a company are owned by the company itself. Owning shares does not entitle a shareholder to any property rights in the company's assets.

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