Question on: JAMB Commerce - 2012
In case of a liquidation of a public limited liability company, those that are first paid are
A
ordinary shareholders
B
prefernce shareholders
C
cumulative preference shareholders
D
debenture holders
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Correct Option: D
In the event of a company's liquidation, the order of payment to different stakeholders is determined by their priority of claims. Debenture holders are creditors of the company and are typically secured creditors. This means they have a claim on the company's assets as collateral for the debt. Therefore, they are paid before other shareholders. Here's the typical order:
1. Secured creditors (debenture holders)
2. Unsecured creditors
3. Preference shareholders
4. Ordinary shareholders
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