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Limited liability

Limited liability normally limits shareholders' exposure for company debts to any unpaid amount on their shares, subject to law and personal guarantees. This protection distinguishes shareholders from the separate company, which owns its assets and remains responsible for its own obligations. The limit depends on the shares and applicable law, and a shareholder may separately assume obligations by signing a guarantee. This legal protection is not a promise that the investment itself cannot be lost.

Worked example

A fully paid shareholder ordinarily need not settle company debts personally.

Common mistake

The company itself remains liable for its debts; guarantees and jurisdiction-specific exceptions can expose an owner.

Where it appears in your exams

QualificationExamRelationshipPeriod
ACCA FA Direct September 2026–June 2027
ACCA K1 Direct July 2027–August 2028
ACCA LW (ENG) Direct September 2026–June 2027
CIMA BA4 Direct Official assessment-window verification pending
FIA FFA Direct September 2026–June 2027

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