Commercial Applications
Directors in a joint stock company are personally liable for all debts incurred by the company.
- True
- False
Joint Stock Company
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Answer
False
Reason — Directors in a joint stock company are not personally liable for the debts incurred by the company. Since a company has a separate legal entity, the liability of every member (including directors who are members) is limited to the nominal value of the shares bought by them or the amount of guarantee given by them. The personal property of directors cannot be attached even if the company is unable to meet its creditors' claims.
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Related Questions
A company faces criticism for taking too long to make decisions due to bureaucratic delays. Which disadvantage of joint stock companies is highlighted here?
- Lack of motivation
- Delay in decision-making
- Conflict of interests
- Unhealthy speculation
A shareholder in a public company transfers all their shares to a competitor, leading to significant changes in company control. The board of directors raises concerns about the implications. What feature of public companies allows such an event to occur?
- Transferability of shares
- Perpetual succession
- Limited liability
- Common seal
Why are joint stock companies better suited for large-scale production than partnerships?
- Joint ownership of property.
- Larger capital resources and professional management.
- Direct involvement of shareholders in management.
- Fewer legal requirements for incorporation.
A company provides its members with limited liability but requires them to contribute a specified amount in case of winding up. What type of company is this?
- Company Limited by Guarantee
- Unlimited Company
- Private Company
- One Person Company