What happens to my shares if the company goes bankrupt?
Bankruptcy is one of the biggest fears for investors. If a company you own shares in goes bankrupt, the process is not like watching the share price slwoly drift down. It usually happens when the company can no longer pay its debts and an administrator or liquidator takes over.
When this happens, the company’s assets are sold and the money raised is used to pay creditors in order of priority. Secured lenders such as banks, are paid first. Unsecrued creditors, like suppliers are next. Shareholders are list in line. In most bankruptcies, there is nothing left over by the time it gets to shareholders. That means your shares are usually worth zero.
If a company is struggling but not yet bankrupt, the stock price will often fall sharply, sometimes to jsut a few cents. Trading may be suspended while administrators work through the process. During this time, you cannot sell your shares. If the company recovers or is taken over, shareholders may get something back but it is rare.