Non-Assessable Stock

Non-Assessable Stock: Meaning, How It Works, and an Example

Key takeaways

• Non-assessable stock is equity that cannot be subject to additional levies by the issuing company; shareholders’ maximum liability is the purchase price.
• Most modern shares are non-assessable.
• In the 19th century, assessable stock—sold at a discount and subject to future calls for more funds—was common but fallen out of favor by the early 20th century.

What is non-assessable stock?

Non-assessable stock is a class of shares that prevents the issuing company from requiring shareholders to pay additional money beyond the initial purchase price. If a company issues non-assessable shares, investors cannot be forced to contribute further capital after buying the stock.

How it works

• Liability limit: The investor’s maximum loss is the amount paid for the shares. If the company fails, shareholders cannot be assessed for extra payments.
• Legal confirmation: Registered equity offerings commonly include a legal opinion stating the shares are “duly authorized, validly issued, fully paid and non-assessable,” confirming no future calls for additional funds.
• Bankruptcy: Non-assessability does not eliminate the risk of losing the invested amount if the company becomes insolvent; it only prevents additional financial obligations to the issuer.

Historical context: assessable vs. non-assessable

In the late 1800s, assessable stock was commonly sold at steep discounts (for example, a $20 share might sell for $5) with the understanding that the issuer could later demand the remaining amount (in this example, up to $15). If a shareholder refused to pay the assessment, the company could reclaim the shares. This practice discouraged investors, and by the early 1900s most companies shifted to issuing non-assessable stock. The last assessable shares were sold in the 1930s.

Example

Stock certificates and corporate filings often include boilerplate language indicating shares are “fully paid and non-assessable.” This phrasing is a routine assurance to shareholders that no future monetary calls will be made on their stock ownership.

Why it matters

Non-assessable stock provides clarity and protection for investors by limiting financial exposure to the initial purchase price. It supports investor confidence and simplifies risk assessment compared with historical practices that could impose unexpected additional liabilities.