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Review Your SQE 1 Practice Records

Examination Timing: 00H00M01S

Robert, Mark, and Eleanor run a business called Horizon Auto Ltd. Robert is the only shareholder. Business decisions are made by Robert and Mark, but Mark and Eleanor handle the day-to-day management of the business. The business is registered with Companies House. 


Who would be liable if the business goes into liquidation and is unable to pay its debts?

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Although the business is registered with Companies House and has a separate legal personality, we can deduce that the company is not a limited company since its name does not include "Limited" or "Ltd.," which is a requirement for a limited company. Therefore, the shareholders' liability is not limited to the unpaid portion of their shares, as would be the case if the company were limited. As Robert is the only shareholder, he would be personally liable for the company's debts. 


Key Point: It is crucial to ascertain whether a company is a limited or unlimited company. Limited companies provide limited liability protection to their shareholders, meaning they are only liable up to the amount unpaid on their shares. In contrast, shareholders of unlimited companies have unlimited liability, meaning they can be held personally responsible for the company's debts. This distinction is essential for understanding the extent of personal risk involved in business ownership.

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