THE TREATMENT OF SECURITIES RELATED CLAIMS IN INSOLVENCY

Abstract

The generally accepted rule in insolvency is that equity holders come last when distributing the assets of the debtor. During the life of the company, shareholders can assume numerous roles that don’t have to be necessarily connected with their status as members. One of the situations that have emerged as fairly controversial concerns shareholders as a damaged party (especially in the domain of securities fraud). In this case, the controversy revolves around the question whether shareholders that suffered damage should be treated as tort claimants and ranked equally with other unsecured creditors, or should their claims be subordinated. These cases have shown the existence of the conflict between the rules of insolvency law and set of laws aimed at investor protection.