3 ms·

The court decides but the rules are quite literally written in the Chapter 11 of the United States Bankruptcy Code. The shareholders usually gets the shortest e

by httpz 3y ago

The court decides but the rules are quite literally written in the Chapter 11 of the United States Bankruptcy Code. The shareholders usually gets the shortest end of the stick.

SoftTalker 3y ago
I believe creditors are first in line. Then preferred shareholders, then common shareholders.
- TylerE 3y ago
  There is a lot more to it than that. For instance, employees mostly come before other creditors.
  - wredue 3y ago
    How is it that time and time again, business die and the executives walk away with a parachute while the regular employees walk away with not even the rest of their pay, but hacker news and Reddit consistently states the regular employees come first? The anecdotes are not aligning with the observations. So what’s the deal here?
    - fsckboy 3y ago
      if there's any money at all, employees get their pay. Shareholders can be forced to go in their pockets and pay employees wages due. I don't know of this happening to a large corp, but if a local restaurant goes bankrupt, or a local construction company, and the owner is not also bankrupt, they can be forced to pay employees. Usually they are also bankrupt. Not sure if those debts survive through personal bankruptcy. You may be referring to employees losing retirement or other benefits like that, but the worst of those loopholes have been closed (the pension can't be in the company's own stock, that type of thing)
      - chii 3y ago
        > Shareholders can be forced to go in their pockets no they cannot. Shareholders can only lose at most the capital they put in originally - they cannot be liable for additional debt. > the owner is not also bankrupt, they can be forced to pay employees. That would be because the owner mixed their own personal wealth with their business (e.g., as a single entity), instead of a limited liability company. Therefore, any assets the owner has is subject to be sold to pay the debt of the business. It's why only small businesses, owned by a single owner (who would have nothing else) is done this way (cheaper administratively i presume).
        lazide 3y ago
        Not true in many locations specifically for unpaid wages: https://cmmllp.com/shareholder-liability-for-unpaid-wages/#:~:text=If%20payment%20is%20not%20made,his%20or%20her%20employment%20terminates https://cmmllp.com/shareholder-liability-for-unpaid-wages/#:....
        chii 3y ago
        That is fair enough. I did not realize this was enacted about 5 years ago.
        TylerE 3y ago
        That seems to be New York State soexific( rather than federal.
        lazide 3y ago
        It’s usually state labor laws. Some states don’t have it, most do. Wages are treated as a special case, often with these type of forced payout clauses and even criminal penalties.
        thrwy_918 3y ago
        "top 10 shareholders" is quite a specific class of shareholders
    - httpz 3y ago
      We're talking about Chapter 11 here, which means the plane has already crashed and the court is deciding who gets what on what is left of the plane, which could still be somewhat valuable. People with golden parachutes already jumped off before the crash.
- asaddhamani 3y ago
  Do preferred shareholders still get their liquidation preference in a bankruptcy? I don’t think they should, they are usually the ones responsible for the bankruptcy. Common shareholders are going to be the employees in this case with ESOPs or RSUs, getting the shortest end of the stick.
  - httpz 3y ago
    Preferred shareholders can be VCs who are usually not directly responsible for the bankruptcy. Also, WeWork is a public company so common shareholder can really be anybody, not necessarily all employees.
quickthrower2 3y ago
https://www.law.cornell.edu/uscode/text/11/507 https://www.law.cornell.edu/uscode/text/11/507

by httpz 3y ago

The court decides but the rules are quite literally written in the Chapter 11 of the United States Bankruptcy Code. The shareholders usually gets the shortest end of the stick.

SoftTalker 3y ago

I believe creditors are first in line. Then preferred shareholders, then common shareholders.

TylerE 3y ago
There is a lot more to it than that. For instance, employees mostly come before other creditors.
- wredue 3y ago
  How is it that time and time again, business die and the executives walk away with a parachute while the regular employees walk away with not even the rest of their pay, but hacker news and Reddit consistently states the regular employees come first? The anecdotes are not aligning with the observations. So what’s the deal here?
  - fsckboy 3y ago
    if there's any money at all, employees get their pay. Shareholders can be forced to go in their pockets and pay employees wages due. I don't know of this happening to a large corp, but if a local restaurant goes bankrupt, or a local construction company, and the owner is not also bankrupt, they can be forced to pay employees. Usually they are also bankrupt. Not sure if those debts survive through personal bankruptcy. You may be referring to employees losing retirement or other benefits like that, but the worst of those loopholes have been closed (the pension can't be in the company's own stock, that type of thing)
    - chii 3y ago
      > Shareholders can be forced to go in their pockets no they cannot. Shareholders can only lose at most the capital they put in originally - they cannot be liable for additional debt. > the owner is not also bankrupt, they can be forced to pay employees. That would be because the owner mixed their own personal wealth with their business (e.g., as a single entity), instead of a limited liability company. Therefore, any assets the owner has is subject to be sold to pay the debt of the business. It's why only small businesses, owned by a single owner (who would have nothing else) is done this way (cheaper administratively i presume).
      - lazide 3y ago
        Not true in many locations specifically for unpaid wages: https://cmmllp.com/shareholder-liability-for-unpaid-wages/#:~:text=If%20payment%20is%20not%20made,his%20or%20her%20employment%20terminates https://cmmllp.com/shareholder-liability-for-unpaid-wages/#:....
        chii 3y ago
        That is fair enough. I did not realize this was enacted about 5 years ago.
        TylerE 3y ago
        That seems to be New York State soexific( rather than federal.
        lazide 3y ago
        It’s usually state labor laws. Some states don’t have it, most do. Wages are treated as a special case, often with these type of forced payout clauses and even criminal penalties.
        thrwy_918 3y ago
        "top 10 shareholders" is quite a specific class of shareholders
  - httpz 3y ago
    We're talking about Chapter 11 here, which means the plane has already crashed and the court is deciding who gets what on what is left of the plane, which could still be somewhat valuable. People with golden parachutes already jumped off before the crash.
asaddhamani 3y ago
Do preferred shareholders still get their liquidation preference in a bankruptcy? I don’t think they should, they are usually the ones responsible for the bankruptcy. Common shareholders are going to be the employees in this case with ESOPs or RSUs, getting the shortest end of the stick.
- httpz 3y ago
  Preferred shareholders can be VCs who are usually not directly responsible for the bankruptcy. Also, WeWork is a public company so common shareholder can really be anybody, not necessarily all employees.

quickthrower2 3y ago

https://www.law.cornell.edu/uscode/text/11/507 https://www.law.cornell.edu/uscode/text/11/507