[patrickthebold]

Random thought and I figure there must be a law against this: But what about the opposite, could a company sell off it's assets and do stock buy backs right until it goes bankrupt so that some investors get more $ ahead of the creditors?

[bombcar]

There are various tricks around this area (the Texas Two-step is a favorite) but most of the blatant ones have clawback possibilities.

https://en.wikipedia.org/wiki/Texas_two-step_bankruptcy

[silisili]

I don't see how this isn't illegal, or more pointedly, why everyone isn't doing it if it is legal? So you can just write off liabilities into a new company? Why wouldn't every company do this every year?

[0x457]

Well, it is illegal to do anything ahead of bankruptcy that would have the effect of preferring shareholders to creditors.

You can't just spin off your debt into a new company and declare bankruptcy as you wish, courts are involved, things must be approved. Clawback exists.

[NoboruWataya]

In general, doing anything in anticipation of bankruptcy that would have the effect of preferring shareholders over creditors is illegal. The way that particular rule is described varies from jurisdiction to jurisdiction and there have been many attempts to get around it, but that is the general principle.

[gamblor956]

It's been tried occasionally a few times over the past century. Most attempts at sham bankruptcies have not succeeded, and the few that went through are still under litigation (see the Johnson and Johnson case from a few years ago).

Bankruptcy law is administrative law, so courts are not limited to the letter of the law when assessing bankruptcy proposals; they are allowed to look at the intent of the la as well.

[criddell]

I've thought about that before.

Would it be technically possible for a company to buy all of its shares back so that there are no owners? The company would be self-owned.

[chimeracoder]

> Would it be technically possible for a company to buy all of its shares back so that there are no owners? The company would be self-owned.

No, because there's a statutory minimum number of shareholders (which varies by country but is always greater than zero).

But even if this weren't the case, it wouldn't be as weird as it sounds. In most states, nonprofits cannot issue stock, but they still exist as corporate entities.

The directors ultimately control the company. Shareholders are secondary: irrelevant, except insofar as they can vote out the board of directors.