Plain language law

New Zealand law explained for everyone

Companies Act 1993

Shareholders and their rights and obligations - Liability of shareholders

97: Liability of shareholders

You could also call this:

“Shareholders' financial responsibilities to the company are limited”

If you are a shareholder in a company, you are not responsible for the company’s debts just because you own shares. This is true unless the company’s constitution says that shareholders have unlimited liability.

Your liability as a shareholder is limited. This means you are only responsible for:

Any money you haven’t paid on shares you own.

Any responsibilities that the company’s constitution says you have.

Any duties you have under sections 131 to 137 because of section 126(2).

Paying back any money the company gave you that it shouldn’t have, as described in section 56.

Any responsibilities you have under section 100.

However, you can still be responsible if you have a separate agreement with the company, like a contract to buy shares. You can also be responsible if you do something wrong to the company, like breaking a promise or causing harm.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM320464.

Topics:
Business > Industry rules
Business > Fair trading
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“Who counts as a shareholder in a company”

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98: Liability of former shareholders, or

“Former shareholders may still owe money to the company in certain situations”

Part 7 Shareholders and their rights and obligations
Liability of shareholders

97Liability of shareholders

  1. Except where the constitution of a company provides that the liability of the shareholders of the company is unlimited, a shareholder is not liable for an obligation of the company by reason only of being a shareholder.

  2. Except where the constitution of a company provides that the liability of the shareholders of the company is unlimited, the liability of a shareholder to the company is limited to—

  3. any amount unpaid on a share held by the shareholder:
    1. any liability expressly provided for in the constitution of the company:
      1. any liability under sections 131 to 137 that arises by reason of section 126(2):
        1. any liability to repay a distribution received by the shareholder to the extent that the distribution is recoverable under section 56:
          1. any liability under section 100.

            1. Nothing in this section affects the liability of a shareholder to a company under a contract, including a contract for the issue of shares, or for any tort, or breach of a fiduciary duty, or other actionable wrong committed by the shareholder.