corporate-law
Why and how would shareholders pay fines for a company?
<p>Recently I read an <a href="https://www.sfgate.com/news/article/PG-E-to-spend-125M-for-igniting-massive-16592638.php" rel="nofollow noreferrer">article</a> on a PG&amp;E settlement which stated that</p>
<blockquote>
<p>PG&amp;E shareholders would pay a $40 million fine and spend another $85 million</p>
</blockquote>
<p>Why is the fine being levied on PG&amp;E shareholders? Isn't the owner of a share not supposed to be liable for company debts?</p>
<p>Furthermore, how would this fine be carried out? Is every individual shareholder being sent a bill based on their percent ownership of the company?</p>

<h2>They aren’t</h2>
<p>The journalist is attributing a payment by the company as a cost to the shareholders.</p>
<p>In accounting terms, that’s a fair equivalency - the shareholder’s equity will fall by the amount of the liability.</p>
<p>In legal terms, it isn’t - the company is a seperate legal entity from the shareholders and a payment by one is not a payment by the other, even though for each shareholder, the value of their shares will change.</p>
<p>However, markets being what they are, the change in value is unlikely to be exactly the same as the amount the company pays, the value may even rise if the market expected the costs to be bigger than they are. They may rise even if the actual costs are bigger than the expectation - markets prefer certainty over uncertainty even in bad news.</p>
<p>Of course, the bulk of the actual cost is likely to be borne by PG&amp;E’s insurers.</p>
