What happens to shares in company when going personally bankrupt?

June 14th, 2005 by Questions

If I have shares in a corporation and go personally bankrupt what happens to my shares in the company?

Questions

2 Responses to “What happens to shares in company when going personally bankrupt?”



June 16, 2005 at 6:53 am, A licensed trustee said:

Since a corporation is a legal entity different and distinct from its shareholders (which is often why you incorporate in the first place), the bankruptcy of a share owner does not directly affect the corporation. However, the bankrupt shareholder’s shares in the corporation are an asset of his or her bankruptcy estate, and it is the trustee’s job to turn into cash these assets.

The value of the shares in the hands of the bankruptcy estate depends on the share’s marketability (will anyone else buy them?), the percentage interest they represent of the corporation (is it a controlling interest?), and the net value of the corporation’s assets (what the company is worth).
If the officers or shareholders are personally liable for the debts of the business, the bankruptcy of a shareholder may eliminate that liability.
In any case, whenever shares in a corporation are involved, the advice of a trustee is necessary before you go bankrupt; click on the Find An Expert link to talk to a trustee in your area.



June 17, 2005 at 11:30 am, Anonymous said:

What if the company has no assets and is in a loss position *but* it earns income and you are the only director/shareholder?

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