GCECommerceBusiness Organisations2022

Which of the following best explains the concept of 'limited liability' as it applies to a shareholder of a company?

AThe shareholder's personal assets are fully available to settle the company's debts
BThe shareholder is liable for the company's debts only up to the amount unpaid on their sharesCORRECT
CThe shareholder cannot transfer their shares without the consent of the board of directors
DThe shareholder is not permitted to hold shares in more than one company at a time
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Why the answer is B, and why the others tempt you.
Limited liability means that a shareholder's financial exposure is restricted to the nominal value of the shares they hold, specifically any amount still unpaid on those shares. If shares are fully paid up, the shareholder owes nothing further even if the company becomes insolvent, protecting personal assets from company creditors.
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