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As a matter of law if a freehold company is in debt are the shareholders required to contribute to the debt, if the debt is not recoverable as service charges?

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Published on LexisPSL on 05/04/2017

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  • As a matter of law if a freehold company is in debt are the shareholders required to contribute to the debt, if the debt is not recoverable as service charges?

As a matter of law if a freehold company is in debt are the shareholders required to contribute to the debt, if the debt is not recoverable as service charges?

We assume that the company in question is not a right to manage (RTM) which manages property pursuant to Commonhold and Leasehold Reform Act 2002 (which would be unusual as such companies usually take over management independent of ownership of the freehold) nor a nominee company formed to collectively acquire the freehold under Leasehold Reform, Housing and Urban Development Act 1993 where obligations of individual qualifying tenants for payment may be regulated by a participation agreement. See Practice Note: Collective enfranchisement—participation agreements.

The company owning the freehold will either be limited by shares or guarantee. A company is a separate distinct legal entity in its own right, separate from its shareholders or members (see Salomon v Salomon & Co Ltd). As a separate legal entity, a company should be treated as any other independent person would be, with its own rights and liabilities. As the separate legal entity it is the company which conducts business, it is the

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