Liquidation preference
A contractual priority for specified preferred equity over specified junior equity in relevant distributions. It is not a guaranteed payment or priority over creditors; available equity proceeds and the security’s terms determine the result.
Liquidation preference in round numbers
Hypothetical: preferred shares have a US$3m liquidation preference over common equity. Payments come from equity proceeds available after senior claims; if that pool is below US$3m, the preference does not create the missing money. Participation and conversion rights can change how proceeds are shared.
Scroll horizontally to read all columns.
| Question | Relevant basis |
|---|---|
| What is available to equity? | Proceeds after senior claims and applicable costs |
| Who has priority within equity? | Specified preferred versus junior equity rights |
| How much can be received? | Available proceeds and preference, participation and conversion terms |
Terms Related to Liquidation preference
Preferred equity · Term sheet · Participating preferred · Cap table · All of the glossary