Defaulting promoters, wilful or otherwise, are known to hide behind the shield that the law provides, treating a company as a separate legal entity, distinct from its promoters, other shareholders, and directors.
Following the doctrine of limited liability, the law recognises that the liability of the shareholders of a company is limited to the extent of their contribution. That has become the ruse of many defaulters. And when lenders turn on the heat defaulters take a ride on the creaky over-burdened bankruptcy and insolvency system.
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“A promoter cannot be held liable for the company’s defaults per se unless it can be shown that he acted fraudu…
Read the full article at: http://www.business-standard.com/article/opinion/of-legal-loopholes-and-defaulters-116031300687_1.html