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ShareholdingExplained
Stage 5 · Selling · 6 min

Who gets paid first?

Preferences, loan notes, the exit waterfall and the final tax bill.

The queue

1Lenders and bank debtBanks and loans are repaid in full before any shareholder sees a penny.
2Preferred investorsInvestors with preference shares or loan notes take what they're owed next.
3Ordinary shareholdersFounders, staff, NEDs and advisers split whatever is left, by percentage.You are here

A simple example

Investors put in £5m with a “1x preference”, meaning they get their £5m back first. The company sells for £10m. You own 2%, so you expect £200,000.

Investors first: £5m
Everyone else shares: £5m

Your slice comes from the green half only. If the investors own 25%, ordinary shareholders share £5m, and your 2% of the company is worth about £133,000, not £200,000. If the company sold for £5m or less, you'd get nothing.

Two flavours to watch for

Typical in VC-backed start-upsFixed: “get our money back first”

The claim stays the same size, but each funding round adds another investor to the front of the queue.

Typical in private equity dealsGrowing: “plus X% every year”

Bank debt and the investors' loan notes sit ahead of you, and the loan notes usually build up interest each year. The business has to grow faster than that for your shares to be worth more.

Real case · BrewDog

How an 18% yearly preference left 100,000+ shareholders with nothing

TSG's 2017 preference shares carried an 18% compound return, reported to have grown to a claim of around £801m by 2024, more than the whole business was estimated to be worth. Staff with shares and crowd investors, who had put in about £74m, were at the back of the queue. When BrewDog was sold out of administration in March 2026 for £33m, ordinary shareholders received nothing.

Quick check

A company with a £20m 1x preference sells for £15m. What do ordinary shareholders get?

Simulate your own exit →Use your own numbers and situation.Request an expert reviewA specialist looks at your documents. Fee agreed with you.

Education only. Real share structures vary: check your company's articles and your own agreements. Not tax, legal or investment advice.