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CELE SQE1 模拟练习

Examination Timing: 00H00M03S

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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Hi teachers, it seems to me that the answer and explanation of this question are incorrect. As it is provided by the scenario that the company is a limited company a with a suffix of “ltd”, why the shareholder is still liable for the liquidation?
Further, I am wondering if R and M can be deemed as shadow or de facto directors so that be liable for the liquidation?

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Hi there,

Thank you for your question. You're correct that the scenario does provide that the business is called "Horizon Auto Ltd," which indeed suggests that it is a limited company.

**Regarding Shareholder Liability:**
Since Horizon Auto Ltd is a limited company, the shareholders' liability is limited to the amount unpaid on their shares. Therefore, Robert, as the only shareholder, would not be personally liable for the debts of the company beyond his unpaid share contributions, if any. The initial explanation provided overlooked this critical point about the business being a limited company as indicated by its name.

**Regarding Directors' Liability:**
On the matter of whether Robert (R) and Mark (M) could be deemed as shadow or de facto directors:

- **Shadow Director:** A shadow director is an individual who is not formally appointed as a director but whose instructions or directions the appointed directors are accustomed to act upon. According to Section 251 of the Companies Act 2006, if either Robert or Mark is exerting such influence, they could be considered shadow directors.

- **De Facto Director:** A de facto director is someone who acts as a director without being formally appointed. If Robert and Mark are making significant business decisions and performing the duties typically expected of a director, they could be deemed de facto directors.

If Robert and Mark are considered shadow or de facto directors, they can be held liable for the company's debts if found in breach of their fiduciary or statutory duties, especially in cases of wrongful trading (Section 214 of the Insolvency Act 1986) or other relevant provisions.

**Encouragement:**
It's great to see you engaging so deeply with the material. Understanding the distinctions between different roles and liabilities within a company structure is critical for grasping the fundamentals of business law. Keep questioning and exploring these nuances!

Please let me know if you have any further questions or need more clarification on any points.

Best regards,
[Your Name]

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