Section 40 - Liability of members

(1) Before the winding up of a company, a member of the company with shares is liable to contribute the balance of the amount payable in respect of the shares held by that member in accordance with the terms of the agreement under which the shares were issued, or in accordance with a call validly made by the company.

(2) Where a contribution has become due and payable in accordance with subsection (1), or where, under the terms of an agreement with the company, a member has undertaken personal liability to make future payments in respect of shares issued to that member, the liability of the member shall continue although the shares held by that member are subsequently transferred or forfeited but the liability of the member shall cease if and when the company receives payment in full of all the moneys in respect of the shares.

(3) Subject to subsections (1) and (2), a member or past member is not liable to contribute to the assets of the company except in the event of the company being wound up.

(4) In the event of a company being wound up, every present or past member is liable to contribute to the assets of the company an amount sufficient for the payment of the debts and liabilities of the company and for the costs, charges and expenses of the winding up, and for the adjustment of the rights of the members and past members among themselves but subject to the following qualifications:

(a) a past member is not liable to contribute if that member has ceased to be a member for a period of not less than one year before the commencement of the winding up;

(b) a past member is not liable to contribute unless it appears to the Court that the existing members are unable to satisfy the contributions required to be made by them in pursuance of this section;

(c) in the case of a company limited by shares, a contribution shall not be required from a member or past member exceeding the amount of money unpaid on the shares in respect of which that member is liable as a present or past member;

(d) in the case of a company limited by guarantee, a contribution shall not be required from a member or past member exceeding the amount of money undertaken to be contributed by that member to the assets of the company in the event of the company being wound up; or

(e) a sum of money due from the company to a member or past member, in the character of a member, by way of dividends or otherwise shall not be set-off against the amount of money for which that member is liable to contribute in accordance with this section, but that amount of money shall be taken into account for the purposes of final adjustment of the rights of the members and former members amongst themselves.

(5) For the purposes of this section, “past member” includes the estate of a deceased member and where a person dies after becoming liable as a member or past member, the liability is enforceable against the estate of that member.

(6) Except as otherwise provided in this section, a member or past member of a company is not liable as a member or past member for any of the debts and liabilities of the company.