Q.Explain the liability of members and the circumstances in which a person ceases to be a member of a company.

A member's liability is capped by the very form of the company they belong to, and membership can end through a member's own act, by law, or by the company's own action.

Liability of Members. The form of the company decides the extent of a member's liability:

• In a company limited by shares, a member's liability is capped at the amount, if any, remaining unpaid on the shares they hold. Once a member's shares are fully paid up, no further contribution can be demanded from them, even if the company later becomes unable to pay its debts. This principle of limited liability is precisely what distinguishes the company form from a sole proprietorship or partnership, where owners face unlimited personal liability.
• In a company limited by guarantee, a member's liability on winding up is capped at the amount they have undertaken to contribute as a guarantee — a sum that becomes payable only if the company is wound up while they are (or were recently) a member.
• Company law's winding-up provisions also generally protect a genuine past member, who transferred away all their shares a reasonable time before the company went into liquidation, from being called upon to contribute towards debts the company incurred after they had already ceased to be a member.

A member is also expected to pay calls on partly-paid shares promptly when validly made by the Board, and to abide by the Memorandum and Articles of Association in their dealings with the company; failure to pay a call in time exposes the member to interest on the overdue amount and, ultimately, to forfeiture of the shares.

Cessation of Membership. Membership comes to an end through any of the following:

1. Transfer of shares to another person, once registered.
2. Transmission of shares by operation of law, on death, insolvency, or lunacy.
3. Forfeiture of shares by the company for non-payment of calls.
4. Surrender of shares to the company, where the Articles permit it. …