Deceased shareholder liabilities

leafy211

If shareholder dies and their share is not transferred to the inheritor before a cash call by the company, to cover some legal costs, who is liable to pay that proportion of the costs?  No claim was made on the estate of the deceased but the company hounded the inheritor for the money (threatening legal action) just a few months after the death and months before they became the shareholder.  The inheritor begrudgingly paid without prejudice, believing they had no choice.  And I read somewhere that a cash call can only be made on shares that arent fully paid up, which these are .. is that correct I wonder?  Effectively the small ltd company was raising money for a court case it had lost, and demanded the shareholders pay equal contributions to cover those costs.  No new shares were created.  

wmb194

Thinking about first principles, the whole point of investing in limited liability companies is that your liability is limited to your investment so in theory there shouldn't have been any obligation to pay anything towards its legal costs. To answer your question you'd probably need to better understand the claimed legal obligation e.g., was there some kind of shareholder agreement in place.

Linton

mmm - I havent heard of a shareholder having to pay for a company's debts.  The worst that should happen is that the shares become worthless. Are you sure the small company is genuine?  Could this be a scammer going in for a second dip? Do you have any details?

Old_Lifer

Is this a company limited by guarantee ?

Marcon

Old_Lifer said:

Is this a company limited by guarantee ?

Not if there are shares - and a cash call normally implies a rights issue. OP, if you look at the website for Companies House and check the name of the company, it will confirm whether or not shares were indeed issued: https://www.gov.uk/get-information-about-a-company

wmb194 said:

To answer your question you'd probably need to better understand the claimed legal obligation e.g., was there some kind of shareholder agreement in place.

This is the bit you really need to understand.

You say the inheritor paid 'without prejudice'. Why did they pay without advice?

Old_Lifer

The person who has died may have been quite old ,  so the company  may date from before 1981 and may have shares.

leafy211

Hi All - so sorry for the late response, Ive not been online this afternoon.  
The company is a Right to Manage (RTM) company that owns the freehold of the block of flats. Each leaseholder is an equal shareholder too (1 share each) a and the company is limited by shares.  Company was inaugurated in 1983.  Im the leaseholder/shareholder that inherited the property, and the share in the RTM. No further shares were issued when the cash call was made.  The memorandum and articles of association allow the directors to raise money for the company.  The cash call was made between my mums death and the many months it took the directors to issue me with my share.  I paid under pressure from the Directors just a couple of months after the death of my mum.  I wasnt in a good place myself to start querying their threatening behaviour at the time, so paid without prejudice.  But i would like to square it up now, along with loads of other issues, hence trying to determine whether they acted correctly etc (even if not with any decorum).

Marcon

leafy211 said:

Hi All - so sorry for the late response, Ive not been online this afternoon.  
The company is a Right to Manage (RTM) company that owns the freehold of the block of flats. Each leaseholder is an equal shareholder too (1 share each) a and the company is limited by shares.  Company was inaugurated in 1983.  Im the leaseholder/shareholder that inherited the property, and the share in the RTM. No further shares were issued when the cash call was made.  The memorandum and articles of association allow the directors to raise money for the company.  The cash call was made between my mums death and the many months it took the directors to issue me with my share.  I paid under pressure from the Directors just a couple of months after the death of my mum.  I wasnt in a good place myself to start querying their threatening behaviour at the time, so paid without prejudice.  But i would like to square it up now, along with loads of other issues, hence trying to determine whether they acted correctly etc (even if not with any decorum).

Ah - that makes sense. 

Try https://www.lease-advice.org for free advice.

leafy211

Yep have been in touch with lease-advice but their specialist knowledge isnt business law so they werent able to guide me definitively.  Not to worry :-)

Thrugelmir

If the liability was your late mothers. Then it would need to be settled when the estate was liquidated by the appointed executors. Not clear from your post the timeline as to when the transactions relating to the property took place.