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What would happen to the lenders if a company becomes insolvent?

Forums › ACCA Forums › ACCA FA Financial Accounting Forums › What would happen to the lenders if a company becomes insolvent?

  • This topic has 3 replies, 2 voices, and was last updated 1 year ago by mrjonbain.
Viewing 4 posts - 1 through 4 (of 4 total)
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  • December 16, 2021 at 8:35 am #644388
    Hinthu
    Member
    • Topics: 7
    • Replies: 4
    • ☆

    In which situation shares become worthless? If the the shares become worthles, liqudator take charge and sell the company’s asset,right? What would happen if the amount is larger and still cannot be settled even after the liquadation?

    December 16, 2021 at 11:23 am #644396
    mrjonbain
    Moderator
    • Topics: 1
    • Replies: 1572
    • ☆☆☆☆☆

    Generally, the unsecured creditors would get so many cents per dollar or pence per pound for their debt. This is why their is a hierarchy for deciding who gets paid first on liquidation. Generally, as a result of separate legal corporate personality, there is no recourse to the personal assets of directors and shareholders. This question seems more related to the law paper than financial accounting. Hope this helps.

    December 17, 2021 at 10:31 am #644458
    Hinthu
    Member
    • Topics: 7
    • Replies: 4
    • ☆

    Thank you. I do self study for ACCA, and I have decided to do FA first. This question just popped up when I read the book under the topic of llC.Any ways, Thanks again.

    December 17, 2021 at 11:31 am #644461
    mrjonbain
    Moderator
    • Topics: 1
    • Replies: 1572
    • ☆☆☆☆☆

    It is somewhat applicable. It’s just more applicable to the law paper. There’s nothing wrong with learning a bit more than required anyway. You are welcome.

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