Question

State whether the following statement is true.

Shareholders of a company are liable for the acts of the company.

Answer 1

This statement is false.

Explanation:

Shareholders of a company are not personally liable for the acts or debts of the company due to the principle of limited liability. In accounting and law, a company is a separate artificial person, meaning its debts belong to the business itself and not to its owners. A shareholder’s financial liability is strictly limited to the unpaid face value of the shares they own. Therefore, if the company incurs heavy losses, goes bankrupt, or is sued, the shareholders’ personal assets cannot be seized to pay the company’s debts.