Question

What is meant by Limited liability?

What is meant by the term ‘Limited liability’?

Answer 1

The liability of a shareholder is limited. The risk of loss is limited to the unpaid amount on the face value of shares held.

Answer 2

Joint stock businesses are referred to by the term limited liability. The members' liability is solely capped at the value of the shares they own. Members are released from future liability once their shares are fully paid up. Therefore, even if the company becomes insolvent at the time of winding up, the member is only accountable to the extent of the amount owed on the shares he owns and will never be required to make any additional payments.