First Principles of Business Law

Business organisations in Australia

7. Companies

Question 12. What is 'limited liability'?

 

 

 

Read the statements below and select the best one.

(a) 'Limited liability' means that, whatever debts a company may incur, it can only be made to pay them to the extent that the company has assets. The members are not individually liable to pay if the company has insufficient assets to pay its debts.

(b) 'Limited liability' means that limits are placed on the extent to which a company is allowed to enter into transactions that involve obligations. A company is not permitted to incur debts that exceed its ability to pay. This rule protects the members of the company from any liability.

 

 

 

 

 

 

 

 

 

 
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