If a company in which you are a shareholder goes bust, it’s very likely you won’t see any of the funds you invested.
This is because in the event of an insolvency, shareholders rank behind debt holders and other parties owed money by the company.
Shareholders are “unlikely to receive any dividend in an insolvent liquidation,” says the Australian Securities and Investments Commission (ASIC).
For example, when ABC Learning – one of the world’s largest childcare providers with more than 1200 centres across Australia, New Zealand, the US and the UK – went bust in 2008, its 34,000 retail shareholders received nothing. In 2006, the company had a market capitalisation of $2.5 billion.
A similar outcome befell most HIH shareholders in the wake of the $5.3 billion collapse of the insurer in March 2001 – the biggest collapse in Australian corporate history.
The Parliamentary Joint Committee on Corporations and Financial Services is conducting an inquiry into corporate insolvency in Australia as the government and corporate sectors look to limit the fallout from businesses collapsing.
In particular, the tax office features prominently in businesses going out of business, as a creditor in 74% of insolvencies, often as the largest creditor and sometimes as the only creditor.
This story is from the August 2023 edition of Money Magazine Australia.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 9,000+ magazines and newspapers.
Already a subscriber ? Sign In
This story is from the August 2023 edition of Money Magazine Australia.
Start your 7-day Magzter GOLD free trial to access thousands of curated premium stories, and 9,000+ magazines and newspapers.
Already a subscriber? Sign In
Is the public market shrinking?
Australia needs a healthy stock market to give companies access to funds and to allow retail investors to build wealth.
India: three steps to transformation
Massive investment and extensive reforms turbocharge the economy.
The ballet of business
Changing direction, products, models and marketing is a hard task for a business. We chart what it takes to turn a business around, plus profile four successful pivots.
Save money and the planet
Could the high cost of living give us the incentive we need to reduce how much water and energy we use or waste? These eco-friendly household tips will help you do just that.
AI adoption is the new black
Artificial intelligence is set to reshape the commercial world, and small enterprises can’t afford to miss the boat.
Spam attack! Murky laws jam our inboxes
Unwanted marketing material is one of the pain points of modern life.
From rags to riches in style
Rich Tran sported a bowl cut until he was 14 years old and had no intention of becoming a hairdresser.
New work deals are killing the 'old' office
The Covid pandemic and the subsequent lockdowns accelerated the trend to more people working from home. It was a mixed experience.
Points taken: the truth about rewards
Can hopping between credit cards really boost your frequent flyer haul and give you cheap or free travel - or is it doing more harm than good behind the scenes? Money puts it to the test.
Shortcuts to own a home
Innovative ideas with a focus on low costs and sustainability could help solve the housing crunch.