Several Liability

Several liability arise when partners decide and agree that each party will only be responsible for his or her share of a liability.

In a way, this means that the two or more partners make their own promises to a third party, resulting in each party only obligated to fulfill the specific promises made by themselves.

For example, a loan might be taken by two partners of 70% and 30% liability respectively.

Each party would only be liable for his or her share of the debt.

If the second partner with 30% liability is unable to repay the debt, a lender will not be able to sue the first partner for that 30% as he is only responsible for his 70%. The lender would only be able to commence legal proceedings for the portion liable by the second partner.

The partner with 70% liability would be under no obligation to pay for the debt of the other partner.

This is the opposite of joint liability.

Several liability of companies

A typical private limited company is also structured like several liability. Shareholders would hold their portion shares and only be liable for the amount that the shares are worth.

For example, a company with 1,000 shares at $1 each might be owned by two shareholders at 60% and 40% respectively. Should the company be sued, one shareholder would stand to lose $600 and the other $400.

This does not take into account the possibility of a civil suit or any personal guarantees that they might have provided to third parties like banks.

In that case, their personal liabilities can be more than the value of their shares.

This implies that if a company limited by shares has been used to purchase property, the property would be owned proportionately according to the shares that each shareholder owns.

And several liability applies.

This is in contrast with a regular partnership business structure where each partner potentially has unlimited liability.

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