In case of a company limited by guarantee, the liability of the members can be enforced

The correct answer is - Only at the time of winding-up of the company

Key Points

• Liability enforcement
  • In a company limited by guarantee, the liability of members is generally not required to be paid during the company's normal operations.
  • The liability of members is enforced only at the time of winding-up, which means during the process of dissolving the company.
  • Members guarantee to contribute a specific amount towards the company's debts and liabilities if it is wound up while they are members or within a year after they cease to be members.

Additional Information

• Company limited by guarantee
  • This type of company does not have share capital; instead, it has members who act as guarantors.
  • Members agree to pay a predetermined amount (guarantee) if the company goes into liquidation.
  • Commonly used for non-profit organizations, clubs, and charities where profit distribution is not the primary goal.
• Winding-up process
  • Winding-up refers to the process of dissolving a company, settling its debts, distributing any remaining assets to members or shareholders, and ceasing its existence.
  • It can be voluntary (initiated by members or creditors) or compulsory (ordered by a court).
  • During winding-up, the company's assets are liquidated to pay off its liabilities, and any remaining funds are distributed to members or shareholders.