Liquidation Risk; What does it mean?

Companies whose shares are owned, declared bankrupt by the Court, or the company is dissolved. In this case the rights of claims of shareholders get the last priority after all obligations of the company can be repaid (from the sale of corporate wealth). If there is any residual proceeds from the sale of the company’s assets, the remainder is shared proportionally to all shareholders.

However, if there is no residual wealth of the company, then the shareholders will not get results from the liquidation. This condition is the heaviest risk of shareholders. For that a shareholder is required to continuously follow the company’s development.

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