# Liability, Capital, Subscription Clauses + Schedule I Tables
## 1. Liability Clause
Specifies the nature and extent of members' liability — limited or unlimited.
### Company Limited by Shares
Liability is limited to the unpaid amount on shares held by members.
### Company Limited by Guarantee
Liability extends to:
Deficit: Amount needed to settle debts and liabilities at winding-up (contracted before the member ceased membership).
Winding-up costs, AND
Adjustment of rights among contributories.
### Lists 'A' and 'B' of Contributories
List
Who
When liable
List 'A'
Members at the time of winding-up
Primarily liable
List 'B'
Persons who were members within 12 months before winding-up
Liable only if List 'A' is insufficient
## 2. Share Capital Clause
Discloses share capital (authorized).
States its division into shares of fixed amounts.
Specifies the number of shares each subscriber agrees to take.
## 3. Subscription / Association Clause
MOA AND AOA must be signed by all subscribers.
Each subscriber states the number of shares he agrees to take.
For OPC, the MOA includes nominee details.
## 4. Forms & Schedule I (Tables A–E for MOA)
Table
Applies to MOA of
A
Company limited by shares
B
Company limited by guarantee and NOT having share capital
C
Company limited by guarantee and HAVING share capital
D
Unlimited company and NOT having share capital
E
Unlimited company and HAVING share capital
## 5. Important Note – Divisible Profits
In the case of a company limited by guarantee and NOT having share capital, any provision in the MOA or AOA giving a non-member a right to participate in the divisible profits is VOID.
Worked example
### Example 1
Q. A member of XYZ Ltd. (limited by shares) owns 1,000 shares of ₹10 each, of which ₹6 is paid up. The company goes into winding-up with insufficient assets. What is his maximum liability?
A. Liability is limited to the unpaid amount: ₹4 × 1,000 = ₹4,000.
### Example 2
Q. ABC Ltd. is a guarantee company. Mr. P ceased to be a member 8 months before winding-up. Will he be liable?
A. Mr. P falls within List 'B'. He will be liable only if List 'A' is insufficient. His liability is limited to debts contracted while he was a member.
### Example 3
Q. A clause in the AOA of a guarantee company without share capital provides that 'Mr. Q, a consultant, shall receive 10% of the divisible profits'. Is this valid?
A. No. The provision is VOID because non-members cannot have a right to participate in divisible profits of a guarantee company without share capital.
⚠️ Common exam mistakes
Confusing List 'A' (current members, primarily liable) with List 'B' (former members, secondarily liable).
Forgetting that List 'B' members are liable only for debts contracted while they were members.
Confusing the Schedule I tables — Tables A–E are for MOA; Tables F–J are for AOA.
Thinking outsiders can be given profit-share through AOA in a guarantee company without share capital — such clauses are void.
Bare-Act text Section 4(1)(d), 4(1)(e), 4(7) read with Schedule I · Companies Act, 2013 · click to expand
Sec. 4(1)(d): The memorandum of a company shall state the liability of members of the company, whether limited or unlimited. Sec. 4(1)(e): The memorandum shall state, in the case of a company having a share capital, the amount of share capital with which the company is to be registered and the division thereof into shares of a fixed amount and the number of shares which the subscribers to the memorandum agree to subscribe which shall not be less than one share. Sec. 4(7): Any provision in the memorandum or articles, in the case of a company limited by guarantee and not having a share capital, purporting to give any person a right to participate in the divisible profits of the company otherwise than as a member, shall be void.