What does limited liability generally mean for a shareholder?
Correct answer: B. The shareholder’s loss is normally limited to the unpaid amount on shares
- A. The shareholder is liable for every company debt
- B. The shareholder’s loss is normally limited to the unpaid amount on shares
- C. The shareholder can never lose the investment
- D. The shareholder must personally manage company operations
Explanation
In a company limited by shares, a shareholder’s liability is normally limited to any unpaid amount on the shares held. Limited liability does not guarantee that the investment itself will retain its value.
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About Company Law Basics
Company law covers incorporation, separate legal personality, limited liability, shares, the memorandum and articles of association, and the powers and duties of directors. It also includes shareholder meetings, resolutions, company records, audit, winding up and the differences between a registered company, partnership and sole proprietorship.
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