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Hemant Batra, Lead Partner, Kaden Boriss Legal LLP, India

The promoters, members and directors of limited liability companies incorporated under the Indian companies laws are not insulated against all odds; there are several exceptions where they could be held liable beyound their stipulated limits as to their contributions in the company.

The exceptions where the members could have unlimited liability include the following scenarios -

1. Where the no. of members of the company falls below the statutory requirement i.e. two in the case of a private company and seven for a public company; and the remaining members continue to operate the company beyound six months from the date of the said reduction and knowingly so. In the instant scenario the said members shall be jointly and/or severally liable for all acts and omissions committed post-six months as above said.

2. If any officer of the company indulges in any fraudulent activity on behalf of the company, he could face unlimited liability for consequences flowing there from.

3. If any person(s) form a company/companies with an intention to defeat any legal obligation or circumvent a law or legal committment; that person(s) and company so formed may have to face legal action without any boundary of limited liability.

4. Finally, in India, the statutory tax laws like income tax are considered superior legislation; meaning thereby that the directors of a company could be held liable personally for the tax liability of that company.

The bottom line is that the exceptions to the concept of limited liability stands created and acknowledged by the statute itself be it the Companies Act and the Income Tax Act; and also by the judicial pronouncements.

Author Hemant Batra is a Corporate, Business & Strategist Commercial Lawyer; Managing Head-Legal, Kaden Boriss Consulting [affiliate of Kaden Boriss (UK) Ltd.]; Lead Partner of Käden Boriss Partners, Lawyers; Vice President of SAARCLAW (South Asian Association For Regional Co-operation In Law); Chairperson of IICLAM (Singapore); and Advisory Board Member of OIC (USA). He is an ardent writer and speaker on current topics of public importance.

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