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Yes, but many investors will have bought their share in the company, and that is worthless. Whether they had enough money paid out through dividends in the run

Yes, but many investors will have bought their share in the company, and that is worthless. Whether they had enough money paid out through dividends in the run-up to that point or not is situation dependent - the company could not pay dividends at all.

cies 6y ago
> many investors will have bought their share in the company, and that is worthless. That's just part of the risk. We're now talking about the bill that is still on the table. If the "investors" were fully responsible for their "investments" they would not have worthless shares, but they would have to pay up for what the company still owes. That their risk stops at "shares being worthless" is exactly what I mean by them being shielded. I learned the energy firm was a coop: they have no shareholders. But the discussion is still interesting, well at least to me :)
- refurb 6y ago
  So you think them losing 100% of their investment is being “shielded”? I mean, they aren’t the only investors.
  - cies 6y ago
    Yes. If you are operating a business as a natural person, you remain liable for all, also the debts of your shop. With limited liability the investors are never liable for the debts. That's exactly how limited liability shields investors.
    - nybble41 6y ago
      > With limited liability the investors are never liable for the debts. Yes, assuming you meant "shareholders" rather than "investors"—creditors are also investors, having put money into the company with the expectation of a return, but would not be liable for borrowers' debts regardless of limited liability. It's the shareholders who are shielded from liability to the corporation's creditors. But the creditors know this and accept the risk as a cost of doing business with a limited liability corporation. If they don't like the corporation's prospects they are not obligated to extend credit.
  - rocqua 6y ago
    If they invested $100 made decisions that cost $150 and now lost their entire $100 investment, they are shielded against the $50. Hence, anything that has real costs higher than their invested stake has effective costs for them at their invested stake. They are shielded to some extent. Especially for low probability high cost events. This is exactly the point of a limited liability company, but it comes with slightly perverse incentives.
    - refurb 6y ago
      When was the last time a shareholder made decisions like what led to this bankruptcy?
      - cies 6y ago
        Some times smaller companies do stuff that makes them a lot of money but also creates debt or legal liabilities (transgressing some environmental laws or not paying taxes). When they go bankrupt later the "investors" already took the proceeds out by dividends. This certainly happened a lot.
  - dkersten 6y ago
    Shielded doesn't necessarily mean that they are protected from all losses. Limited liability means that the liability is limited by the investment that was put in: they can lose up to their investment, but no more.

cies 6y ago

> many investors will have bought their share in the company, and that is worthless. That's just part of the risk. We're now talking about the bill that is still on the table. If the "investors" were fully responsible for their "investments" they would not have worthless shares, but they would have to pay up for what the company still owes. That their risk stops at "shares being worthless" is exactly what I mean by them being shielded. I learned the energy firm was a coop: they have no shareholders. But the discussion is still interesting, well at least to me :)

refurb 6y ago
So you think them losing 100% of their investment is being “shielded”? I mean, they aren’t the only investors.
- cies 6y ago
  Yes. If you are operating a business as a natural person, you remain liable for all, also the debts of your shop. With limited liability the investors are never liable for the debts. That's exactly how limited liability shields investors.
  - nybble41 6y ago
    > With limited liability the investors are never liable for the debts. Yes, assuming you meant "shareholders" rather than "investors"—creditors are also investors, having put money into the company with the expectation of a return, but would not be liable for borrowers' debts regardless of limited liability. It's the shareholders who are shielded from liability to the corporation's creditors. But the creditors know this and accept the risk as a cost of doing business with a limited liability corporation. If they don't like the corporation's prospects they are not obligated to extend credit.
- rocqua 6y ago
  If they invested $100 made decisions that cost $150 and now lost their entire $100 investment, they are shielded against the $50. Hence, anything that has real costs higher than their invested stake has effective costs for them at their invested stake. They are shielded to some extent. Especially for low probability high cost events. This is exactly the point of a limited liability company, but it comes with slightly perverse incentives.
  - refurb 6y ago
    When was the last time a shareholder made decisions like what led to this bankruptcy?
    - cies 6y ago
      Some times smaller companies do stuff that makes them a lot of money but also creates debt or legal liabilities (transgressing some environmental laws or not paying taxes). When they go bankrupt later the "investors" already took the proceeds out by dividends. This certainly happened a lot.
- dkersten 6y ago
  Shielded doesn't necessarily mean that they are protected from all losses. Limited liability means that the liability is limited by the investment that was put in: they can lose up to their investment, but no more.