Kara runs her catering business through Kara's Kitchen Ltd. She holds 99 of its 100 fully paid shares and is its sole director. The company owes a supplier £40,000 and cannot pay. Kara has given no personal guarantee. Can the supplier recover the debt from Kara personally?

Correct answer: B) No, because the company is a legal person separate from its members, so the debt is the company's and not Kara's

Explanation

Salomon v A Salomon & Co Ltd established that a registered company is a separate legal person, distinct from its members, even where one person holds almost all the shares and controls it. The company owns its assets and is liable for its debts. Members' liability is limited to any amount unpaid on their shares, and Kara's shares are fully paid. Directors are not personally liable on company contracts merely because they are directors, and no guarantee was given, so the supplier's claim is against the company alone.