Limited liability
The rule that a shareholder can lose at most what they paid for their shares, and is not responsible for the company's debts.
Companies with "Limited" or "Ltd" in their name are limited companies. If such a company fails owing money it cannot repay, its lenders and suppliers cannot claim the shareholders' personal assets. The most a shareholder can lose is the amount invested in the shares.
This protection does not cover money you borrow to buy shares: that loan is your own debt and must be repaid regardless.
Example
You invest ₹10,000 in shares of a company that later collapses owing ₹500 crore. You lose your ₹10,000, but the company's lenders cannot ask you to contribute towards the ₹500 crore.
Learn more in these lessons
- What is a share?What does owning a share actually mean?
Related terms
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