How the stock market works

1  2  3  4  5  6  7  8  9  10  11  12  13  14  15  16  17  18   

17. Insolvency

Listed companies occasionally become insolvent and go out of business. If this happens, the assets will be sold off to pay creditors in a well-defined queue.

Ordinary shareholders come last in the queue, a long way behind secured creditors, and quite often get nothing back. Preference shareholders may be luckier.

On the bright side, the principle of limited liability means that shareholders cannot lose more than the value of their shareholdings. Despite being the owners of the business, they cannot be held liable for the company's debts.

1. Why do companies list on the Stock Exchange? 2. Offers for sale 3. Offers by tender, and other methods of admission 4. The Official List 5. AIM and OFEX 6. Different types of share 7. Reasons for market indices 8. The FTSE indices 9. Sectors 10. Scrip issues 11. Rights issues 12. Convertibles 13. Warrants 14. Share buybacks 15. Shareholder perks 16. Suspension 17. Insolvency 18. Conclusion