XYZ Ltd. took a loan of Rs.50 lakh from a bank for its growth and expansion plans. The company was unable to repay the loan amount because of heavy losses incurred in the business on a continuous basis. The management of the company asked its shareholder to contribute towards repayment of the loan. But the shareholders refused as they already paid the full amount due amount on their shares. The bank filed a case against XYZ Ltd. in the court. The court held that the shareholders of the company were not liable to repay the loan as they had not unpaid amount on shares.
(a) Is the court decision justified? Give reason in support of your answer
(b) Which characteristics of the company form of organization protected the shareholders. Explain
(c) Explain any two characteristics of the company other than mentioned in (b)
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Ans A: Yes, the decision of the court is justified as the liability of the shareholders of the company is limited to amount unpaid on the shares held by them (if any).
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