Risk Transfer By Conversion to Public Limited Company
Incorporation is another example of risk transfer. If a firm is a sole proprietorship, creditors for satisfaction of debts can attach the owner’s personal assets, as well as the assets of the firm. If a firm incorporates, however, creditors for payment of the firm’s debts cannot attach the personal assets of the stockholders. In essence, by incorporation, the liability of the stockholders is limited, and the risk of the firm having insufficient assets to pay business debts is shifted to the creditors.
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Incorporation is another example of risk transfer. If a firm is a sole proprietorship, creditors for satisfaction of debts can attach the owner’s personal assets, as well as the assets of the firm. If a firm incorporates, however, creditors for payment of the firm’s debts cannot attach the personal assets of the stockholders. In essence, by incorporation, the liability of the stockholders is limited, and the risk of the firm having insufficient assets to pay business debts is shifted to the creditors.
Insurance Law And Practice - ICSI
Risk Transfer By Conversion to Public Limited Company
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