Companies Act 2014 section 997

Liability as contributories of past and present members and provision concerning winding up after certain re-registration

Section 997 sets out the liability of both current and former members of a Designated Activity Company (DAC) to contribute towards the company's debts and winding-up costs, and the limits that apply to that liability depending on whether the DAC is limited by shares or by guarantee.

• When a DAC is wound up, all present and past members may be required to contribute towards the company's debts, liabilities, and winding-up costs, but their liability is capped — for a shares-limited DAC, at the unpaid amount on their shares, and for a guarantee-limited DAC, at their guarantee amount plus any unpaid share amounts
• Past members are protected in several ways: they are not liable if they left more than one year before the winding up commenced, they are not liable for debts incurred after they ceased to be members, and they can only be called upon if the court finds that current members cannot meet the required contributions
• Any sums owed to a member in their capacity as a member — such as dividends or profits — do not rank as a company debt in competition with outside creditors, though they may be taken into account when adjusting rights among contributories
• Where a DAC was previously an unlimited company before re-registration, special rules under section 665 apply, with the relevant liability cap references adapted to match the DAC's structure (shares or guarantee)

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