Liability of contributories depends on proved share surrender, accepted by directors, and limits on past-member protection
A shareholder remains liable as a contributory unless a surrender of shares is clearly proved and shown to have been accepted by the directors in the manner authorised by the company. Mere correspondence or an uncorroborated oral assertion is insufficient without resolution or documentary acceptance. Statutory protection for past members does not apply where the person continued to be a member at the commencement of winding up, so liability is not avoided on that basis. An objection based on want of notice also fails where the record does not establish absence of notice or any sufficient ground to disturb the contributory list.
Issues: (i) whether the appellants had surrendered their shares and the surrender had been accepted by the directors so as to relieve them from liability as contributories; (ii) whether Section 156 of the Companies Act protected the appellants from liability in the winding up proceedings; and (iii) whether the absence of notice to one appellant vitiated his inclusion in the list of contributories.
Issue (i): whether the appellants had surrendered their shares and the surrender had been accepted by the directors so as to relieve them from liability as contributories.
Analysis: The asserted surrender was not supported by reliable material. The correspondence relied on merely showed a request concerning directorships and did not establish any formal surrender of shares or acceptance of such surrender by the directors. No resolution or documentary proof of acceptance was produced, and the oral assertion of a later meeting was inconsistent with earlier statements and was not accepted.
Conclusion: The alleged surrender of shares and acceptance by the directors was not proved, and the appellants remained liable as contributories.
Issue (ii): whether Section 156 of the Companies Act protected the appellants from liability in the winding up proceedings.
Analysis: The appellants had not ceased to be members of the company. They therefore could not be treated as past members who had ceased to be members for the requisite period before the commencement of winding up. On that footing, the statutory protection invoked by them did not apply.
Conclusion: Section 156 of the Companies Act did not absolve the appellants from liability.
Issue (iii): whether the absence of notice to one appellant vitiated his inclusion in the list of contributories.
Analysis: The record did not establish that the appellant had in fact been left without notice, and no sufficient basis was shown for disturbing the order on that ground.
Conclusion: The objection based on want of notice failed.
Final Conclusion: The challenge to the order settling the list of contributories failed in all material respects, and the appellants' liability in the winding up was upheld.
Ratio Decidendi: A signatory to the memorandum remains liable as a contributory unless a surrender of shares is clearly proved and accepted in the manner authorised by the company, and the protective provision for past members does not apply where the person continued to be a member at the commencement of winding up.
TaxTMI 
AI Drafter ✕
TaxTMI 
