In liquidation, when do shareholders receive their repayments?

In the context of liquidation, shareholders typically receive their repayments only after all creditors have been satisfied. This hierarchy is essential in insolvency proceedings where the primary goal is to settle debts owed to creditors, who have a legal claim over the company's assets. Creditors, particularly secured creditors, have the first rights to the assets of the company. Once all debts, including claims from unsecured creditors, are fully paid off, any remaining assets can then be distributed to the shareholders.

This principle underscores the protective mechanism built into corporate law that prioritizes creditors' rights to minimize their losses when a company is unable to meet its financial obligations. Shareholders, on the other hand, are considered residual claimants; they are entitled to any leftover assets only after all liabilities have been addressed. In cases where no surplus remains after creditors' claims are met, shareholders may receive nothing at all, which aligns with the notion that investments in equity carry higher risk compared to debt.