If companies failed, they could then be wound up easily in liquidations that contained the amount of debt and repaid it with the company's assets. Photo / APN
The debts of a company are not the debts of the person who owns it, says Professor Susan Watson, deputy dean of the faculty of law at Auckland University.
She said the Companies Act allowed companies to exist as their own legal entities - effectively a separate individual from those
listed as the shareholders.
The "limited" at the end of the company name stood for limited liability, which meant shareholders' liability for debts was constrained by the value of the shareholding.
In New Zealand that could be just a single dollar.
It allowed companies to be started easily, encouraging entrepreneurs and innovation and protecting them from debt.