shareholders of the company. If the company is prosperous and makes good profits, the company will then distribute dividend to the shareholders in accordance with their respective shareholdings. If the company suffers a loss, the shareholders will, at the most, lose all their investment in the shares of the company. In other words, their liabilities are limited to the value of the shares.
　For example, Goodwill Company Limited has a share capital of $500,000 divided into 50,000 shares of HK$10 each. John and Mary are the shareholders of the company, each holding 20,000 shares which are fully paid. The company therefore has a capital of $400,000 for trading. The maximum liability for Mary and John in the company is $200,000 each. The company has 10,000 shares unissued, which can be used as a reserve for future use, e.g. John and Mary may want to find a new shareholder to join their business, the company can then issue the remaining shares to that person without increasing capital.
The nominal value of a share of the company is HK$10. However the actual value or the issued price of the share is determined by the market value of the share. Suppose the company, after several years of business, has assets value up to the amount of HK$2,000,000, then the market value of a share of the company is HK$50. The 40,000 shares held by John and Mary is now worth HK2 million.

　The shares of a company are usually paid in full when they are issued. However, it is possible that shares issued are only partly paid, but then the members would be liable for the unpaid portion of the shares to the company. A company limited by guarantee is a company which is often used as a device for setting up of a club, association, school or charitable body.
　The liability of its members is limited to the amount which they agree to contribute to its assets in the event of the company being wound up. The members are not required to make monetary contribution to the company at the time of incorporation. They are only required to give an undertaking to pay a certain amount to the company if the company is in liquidation. In practice, the amount is merely nominal, e.g. $100.

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