Persons Liable as Contributories

Present and Past Members. A member of a limited company shall be liable to contribute the amount unpaid on the shares in respect of which he is a contributory, or the amount he has guaranteed to pay in the event of winding up. A past member shall be liable to contribute: (i) if he ceased to be a member within one year before the commencement of winding-up; (ii) the debt liability was contracted or incurred while he was a member; and (iii) the present members fail to meet the liabilities in respect of the debts incurred while he was a member (Section 426).

2. Directors and Manager Whose Liability is Unlimited. In the winding-up of a limited company, any Director or Manager, whether past or present, whose liability is unlimited shall be liable as if he were a member of an unlimited company. But, a contribution from such a person shall require a Court order, and he shall not be liable if he had ceased to hold office for a year or upward before the commencement of the winding-up (Section 427). A past Director or Manager shall not be called upon to make payment as a contributory if the debt or liability of the company was contracted after he ceased to be the Director or Manager, as the case may be.

3. Legal Representatives of a Deceased Member. If a contributory dies either before or after he has been placed on the list of contributories, his legal representatives shall be liable to contribute to the assets of the company in discharge of his liability and are contribu tories accordingly [Section 430(1)]. But they are only liable to contribu te to the extent of the assets, if any, which have come into their hands from the deceased shareholder [Prayan Prasad Vs. Gaya Bank & Traders Assn. Ltd. (1931) 1 Compo Cas. 85].

The expression ‘legal representative’ for the purposes of Section 430 is not confined to the legal representatives of the person primarily interested but also includes the legal representatives of his legal representatives [P.R. Krishnaswami, In re (1947) 17 Compo Cas. 189 (Mad)].

In case shares are held jointly, the interest of the deceased shareholder passes on to the survivor and not to the heir of the deceased. The heir neither becomes a shareholder nor a contributory within the meaning of Section 430, read with Regulation 25 of Table A [Ram Gobind Mishra Vs. Allahabad Theatres Pvt. Ltd. (1986) Tax L.R.

1681 (All.)]. .