The legal threat to every blue chip

Limited liability -- the legal principle that the owners of a company are not liable for its debts -- is a cornerstone of the modern economy because it encourages investors to pool their capital to form businesses that hopefully become larger businesses over time.

If companies did not have limited liability, fewer businesses would be started, and those that were would find it harder to raise capital. Most passive investors would prefer to avoid taking on the risk of forming a partnership instead, because every partner is liable for the partnership's debts.