Limited liability protects shareholders, but it can harm creditors if a company becomes insolvent. If company assets are insufficient, creditors may recover only part of what they are owed.
They cannot automatically pursue shareholders' personal assets for the shortfall. This creditor-side loss is the main reason the concept needs careful Shari‘ah examination.
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Limited Liability: The Modern Concept and the Shari‘ah Question
Limited liability protects shareholders, but it can harm creditors if a company becomes insolvent. If company assets are insufficient, creditors may recover only part of what they are owed.
They cannot automatically pursue shareholders' personal assets for the shortfall. This creditor-side loss is the main reason the concept needs careful Shari‘ah examination.