Jo and Tom subscribed for shares in a new company. The issued share capital of this company

was 100,000 with a nominal value of 1 each. Jo subscribed for 20,000 shares and paid

5,000, the remainder being unpaid. Tom subscribed for 30,000 shares and paid 10,000, the

remainder being unpaid. This capital was spent on purchasing machinery and paying advance

rent for premises. After a period of 12 months the company went into liquidation owing 40,000

to a variety of creditors.

What is the liability of Jo and Tom?

A)

They are not liable for any of the debts because the business was a limited company.

B)

The creditors can choose to sue the majority shareholder for the whole outstanding debts

C)

Jo is liable to contribute 15,000 and Tom is liable to contribute 20,000.

D)

Jo is liable to pay 15,000 to creditors and Tom must pay creditors 20,000. The creditors

can claim from which of the two they choose to claim from.