Which of the following statements are INCORRECT? As the directors of the company, Sarah and Doug are personally liable for the $100,000 debt that the company will incur.
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Sarah and Doug want to set up a company to start a business importing children’s toys from Europe into New Zealand. They will both be directors and equal shareholders. They each pay $500,000 for 100 shares each. The company will have assets (personal property) worth $950,000 and $50,000 in cash reserves. The company will borrow $100,000 from Big Bank to make the first purchase of toys from Europe. The company’s assets do not have any securities registered over them.
Which of the following statements are INCORRECT?
- As the directors of the company, Sarah and Doug are personally liable for the $100,000 debt that the company will incur.
- The company will carry on existing if either Sarah or Doug retires as a director or sells their shares.
- The company is a separate legal person and its debts are separate from those owed by Sarah and Doug.
- Sarah and Doug will be able to issue additional shares and sell them if they want to raise additional funds for their company in the future.
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