In general, how much do unsecured creditors receive from aliquidation? How much do stockholders receive?
In general, how much do unsecured creditors receive from a
liquidation? How much do stockholders receive?
Liquidation of a company refers to a procedure in which all the assets of the company are sold and proceeds from such sale are used for settlement of dues to claimants. Liquidation implies that the business will no longer operate and therefore is the legal death of entity.
Unsecured creditors lie at the second position in the order of preference for repayment by the company only behind secured creditors. Consequently, unsecured creditors receive their dues once the full payment to the secured creditors is made. Generally, unsecured creditors are settled in full because the repayment for stock and debt which form the major chunk of company's payment obligations is made after the settlement of creditors.
Step by step
Solved in 3 steps
