What do I get if the company goes bust?Medium

There is a queue, it is fixed in law and contract long before the trouble starts, and where you stand in it was decided the day you bought.

3 min read · 596 words · Updated 4 Sep 2026

Something specific, and it depends entirely on which piece of paper you hold. A company that fails does not lose value evenly across everybody who financed it. It pays out in a fixed order, and that order was settled the day each instrument was issued — not on the day things went wrong.

The queue

Roughly, and with real variation between jurisdictions:

1. Costs of the insolvency itself — the administrator, the lawyers. Paid first, out of whatever there is.
2. Secured lenders. They lent against named assets. If the loan was secured on a building, they have a claim on that building rather than on the general pot.
3. Preferential claims. Often unpaid wages and certain taxes, depending on the country.
4. Unsecured lenders. Ordinary corporate bonds, trade creditors, most bank debt without security.
5. Subordinated debt. Lends the same money, has agreed in writing to be paid after the unsecured lenders.
6. Hybrids — instruments written to absorb losses before the equity is gone, such as a contingent convertible.
7. Preference shares, then
8. Ordinary shareholders, who receive whatever is left. Usually nothing.

This is what "residual claim" means on the common stock page. A share is not a small bond. It is the promise to be paid last.

A worked example

A company owes 60 to a secured lender, 50 to bondholders and 10 to suppliers, and its assets are sold for 80.

• The secured lender takes 60, in full, because the assets it lent against were enough.
• 20 is left for 60 of unsecured claims, so each unsecured creditor receives 20 ÷ 60 = one third of what they are owed. A bondholder owed 50 receives about 16.7.
• Shareholders receive nothing, and there is nothing unusual about that.

The bondholder lost about two thirds. The shareholder lost everything. Both held the same failing company.

Why the order matters more than the size

People compare instruments by how much they might lose. The queue says something sharper: whether the outcome depends on the size of the shortfall at all. A secured lender is often indifferent to a company being slightly bankrupt or catastrophically bankrupt, because the collateral covers either. A shareholder is wiped out identically in both cases.

The interesting zone is the middle. Unsecured lenders are where the recovery actually varies with how bad things were, which is why the price of a bond in trouble moves so much: it is the one layer where the answer is neither "paid" nor "nothing".

What changes the answer

• Security. A claim on a named asset behaves differently from a claim on the company.
• Structure. Debt issued by a subsidiary that owns the assets is paid before debt issued by the parent that owns the subsidiary. This is structural subordination, and it is invisible from the name of the borrower.
• The resolution regime. For banks, the modern rules replace the ordinary queue with a statutory one designed to recapitalise the bank rather than liquidate it. Credit Suisse in March 2023 is the case where a hybrid layer was written down to zero while shareholders still received something — an order that surprised many holders and was, on that instrument's terms, what the documents said.
• Jurisdiction. The queue is national law. Two identical bonds issued by two subsidiaries in two countries can recover differently.

What to read next

• Which risk decides — the same idea across every instrument on this site.
• Credit spreads — what a lender charges for standing in that queue.
• The 2023 hybrid write-down — what happens when the order is not the one holders assumed.