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Companies Act 1993

Shareholders and their rights and obligations - Liability of shareholders

99: Additional provisions relating to liability of shareholders and former shareholders

You could also call this:

“Rules about owing money to a company for current and former shareholders”

If you own or used to own shares in a company, you might still owe money to the company in some situations. This can happen even if your responsibility to pay was reduced or cancelled.

You might have to pay if the company doesn’t have enough money to pay its debts when it’s closing down. This applies to debts the company had before it made changes like changing its rules, buying back shares, joining with another company, or changing how it’s registered.

The amount you have to pay is the smaller of two things: either how much your responsibility was reduced, or how much is needed to pay off the company’s debts.

If you received money from the company as a distribution and the company got it back from you, this reduces how much you owe. Also, if you have to pay money to the company because of this rule, it reduces the amount of distribution you’re considered to have received.

These rules also apply to companies that have joined together with other companies. If you were a member of a company with limited guarantee or unlimited company under the old rules, you’re treated as if you owned shares that could require you to pay money.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM320472.

Topics:
Business > Industry rules
Business > Fair trading
Money and consumer rights > Banking and loans
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98: Liability of former shareholders, or

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

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100: Liability for calls, or

“Shareholders' responsibilities for unpaid amounts on shares”

Part 7 Shareholders and their rights and obligations
Liability of shareholders

99Additional provisions relating to liability of shareholders and former shareholders

  1. If—

  2. a shareholder or former shareholder of a company was, at any time, liable to the company in respect of a share held by that person; and
    1. that liability was cancelled or reduced by—
      1. an alteration of the constitution, repurchase or redemption of the share, or amalgamation; or
        1. reregistration under this Act in accordance with the Companies Reregistration Act 1993; or
          1. a change of registration under section 30 of the Companies Act 1955; and
          2. the company is, at the commencement of its liquidation, subject to liabilities incurred prior to the alteration of the constitution, repurchase or redemption of the share, amalgamation, reregistration, or change of registration, as the case may be; and
            1. the assets of the company are not sufficient to discharge those liabilities in full,—
                1. that person is liable to the company for the amount specified in subsection (2).

              1. A person is liable under subsection (1) for the lesser of—

              2. the amount by which the liability in respect of that share was reduced:
                1. the amount required to be contributed in respect of each such share in order to discharge those liabilities.

                  1. The liability of a person under subsection (1) is reduced by an amount received by that person as a distribution under section 57 and recovered from that person by the company.

                  2. The amount received by a person as a distribution under section 57 is reduced by any amount recovered from that person pursuant to subsection (1).

                  3. For the purposes of this section,—

                  4. the term company includes an amalgamating company which amalgamated with 1 or more other amalgamating companies to continue as that company:
                    1. a member of a company limited by guarantee registered under the Companies Act 1955 is to be treated as if the member was, prior to reregistration of that company under this Act in accordance with the Companies Reregistration Act 1993, the holder of a share which rendered the member liable to calls not exceeding the amount of contribution specified in the memorandum of association as the amount undertaken to be contributed by that member in a winding up:
                      1. a member of an unlimited company registered under the Companies Act 1955 is to be treated as if the member was, prior to reregistration of that company under this Act in accordance with the Companies Reregistration Act 1993, the holder of a share which rendered the member liable to unlimited calls.