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Review Your SQE 1 Practice Records

Examination Timing: 00H00M57S

Innovation Ventures Plc was established by Thomas and James in 2010, with each subscribing for an equal number of shares and paying only the minimum amount required by law. They are the sole shareholders. When the business goes into liquidation, the assets of the business are insufficient to pay its debts. 


Which of the following best describes Thomas and James's liability regarding the debts? 

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In the case of a public limited company (Plc), shareholders' liability is limited to the unpaid portion of their shares. We know from the question that the company is public as it uses the suffix "Plc." Both Thomas and James subscribed for half of the shares each, but only paid the minimum amount required by law. The minimum issued share capital for a Plc is currently £50,000, and the law requires that at least one-quarter must be paid up. This means Thomas and James each paid £6,250 and have an unpaid portion remaining. Therefore, their liability is limited to this unpaid portion of their shares.


Key Point: The limited liability principle protects shareholders of a limited company, whether public or private, by capping their potential losses to the amount unpaid on their shares. This ensures that shareholders are not personally liable for the company's debts beyond their initial investment.

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