The statement that is true about the order of repayment for a company in liquidation is:
A) creditors rank before ordinary shareholders.
B) wages owing to employees rank last.
C) ordinary shareholders rank before preference shareholders.
D) All of the statements are true.

Question

Quizplus · Accepted Answer

Creditors rank before ordinary shareholders in the repayment order for a company in liquidation. This is because creditors have a higher level of priority in terms of repayment as they have provided the company with credit or goods and services that have not been paid for, whereas ordinary shareholders have invested in the company and are considered owners rather than creditors. Additionally, wages owed to employees generally rank above ordinary shareholders but below secured creditors. Preference shareholders rank above ordinary shareholders but below secured creditors and certain other classes of preferred debts.

The Statement That Is True About the Order of Repayment