What happens to the management and investors of a company when the company goes bankrupt? - Seedly
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Anonymous

Asked on 22 Sep 2018

What happens to the management and investors of a company when the company goes bankrupt?

Will they get filed for bunkruptcy as well?

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Png Cheng Xi Damien
Png Cheng Xi Damien, Happy Life Seeker at Home
Level 6. Master
Answered on 25 Sep 2018

When a company is declared bankrupt, it undergoes liquidation by court order. The company will cease to exist after the liquidation. Proceeds from liquidation will go first and foremost of creditors (who the company owe money to). Any remaining is then paid to investors according to share %.

Unless there is strong evidence of negligence or misconduct, the management usually gets away scotfree. The lawsuit must be filed by investor(s). The management will only be liable for liquidation if they have guaranteed the debt of the company using their own assets. Most of the time, it's usually just the paid up capital.

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