Question

What is the principle upon which a company limited by shares is based, and why is it significant? (Minimum 250 words)

Answer 1

The principle on which a company limited by shares is that the liabilites of its members ie., shareholders or the owners of the company is limited to the balance amount if any which remains unpaid on the shares held by its members. If the company has paid for the shares fully and then the company is incurred with a financial strife, then even so, the members of the company is not required to contribute any amount for the payment of financial strife. It is significant because the shareholders has to pay only for the debts of the company to the extent that is unpaid on the shares held by the shareholder and so no separate property of member is required to meet the debt of the company.