Question

Fill in the blank. Shareholders of a company that is forced to file bankruptcy are almost always ______ ____.

Answer 1

Shareholders of a company that is forced to file bankruptcy are almost always left with nothing.

As the equity shareholders are always paid at the end, so when the company files bankruptcy, the creditors of the company are paid in full as they have the first right on it and the remaining will be distributed to the shareholders, if there is any. In general, very little will likely be left for the shareholders.

Hierarchy of the distribution of money to the claimants in case the company files bankruptcy:

1. Bondholders - Secured and unsecured creditors

2. preferred shareholders

3. Common shareholders