Members severally liable in certain cases
📚 Law Minded summary
A short section with sharp teeth. If a company's membership drops below the legal minimum — seven for a public company, two for a private one — and it keeps trading for more than six months anyway, the protection of limited liability falls away.
Every member who knows about the shortfall and stays on becomes personally liable for the debts run up during that time, and can be sued for them individually.
If at any time the number of members of a company is reduced, in the case of a public company, below seven, in the case of a private company, below two, and the company carries on business for more than six months while the number of members is so reduced, every person who is a member of the company during the time that it so carries on business after those six months and is cognisant of the fact that it is carrying on business with less than seven members or two members, as the case may be, shall be severally liable for the payment of the whole debts of the company contracted during that time, and may be severally sued therefor.]
All sections in Chapter II — Incorporation of Company and Matters Incidental Thereto