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I asked this question before but I was not very specific in the terms I used back then. I now have a clearer idea and know the subject a bit better so I thought to ask a more precise question.

As the title goes, let's assume I buy 10 shares of the company Xxx Inc. traded on the NYSE. Let's also assume the company does something horribly wrong and ends up with debts and is forced to declare bankruptcy.

Is it absolutely true in every possible scenario that I only lose the money I spent to buy the initial 10 shares?

Thanks

2 Answers 2

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As an ordinary shareholder, yes you are protected from recourse by the debtors. The maximum amount you can lose is the amount you spent on the shares. The rules might change if you are an officer of the company and fraud is alleged, but ordinary stockholders are quite well protected.

Why are you worried about this?

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  • Reason for my concern is that, in previous conversations with people who sounded fairly familiar with the subject, it came out that not all the companies in the stock market are actually limited liability companies. In such cases, if you are a stock holder, you can indeed be found liable if things go horribly wrong. Now, which these companies are I have no idea and surely they are not the incorporated ones (Inc.). I just thought to ask the question again and maybe figure out how to spot unlimited liability firms.
    – nourdine
    Commented Oct 10, 2016 at 21:33
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    @nourdine Can your friends give an example of something listed on the major stock exchanges that doesn't have limited liability? Some things have strange tax implications in tax advantaged accounts, but I can't think of anything that doesn't limit the liability.
    – zeta-band
    Commented Oct 10, 2016 at 22:08
  • @nourdine By definition, incorporated confers limited liability to owners of a company, and that includes owners of the company's stock. Commented Apr 7, 2021 at 18:44
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From Wikipedia:

If a company with limited liability is sued, then the claimants are suing the company, not its owners or investors. A shareholder in a limited company is not personally liable for any of the debts of the company, other than for the value of their investment in that company.

Summarized, no, if you buy stock from the regular stock market like NYSE, you're not personally liable for any debt or fraud that happens.

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