Investing in practice

What happens to your shares when a crowdfunded company fails

Q: Do you still own shares after the company is dissolved?

No. Once it no longer legally exists, there is nothing to own, and HMRC treats the dissolution as a disposal.

Q: Does EIS or SEIS relief get clawed back when a company fails?

Not because of a failure alone: for EIS, HMRC says administration or a genuine commercial winding up does not of itself withdraw it.

When a crowdfunded company fails, its assets go first to secured creditors, the costs of the insolvency and other creditors, and shareholders are paid last, so you may well get nothing back. As of 4 Nov 2026, what usually remains is a tax loss you may be able to claim, as no compensation scheme covers an investment that simply fails and the UK's £85,000 FSCS limit is for a provider that fails owing you money.

Not investment advice. Early-stage investing is high-risk and illiquid; you may lose all the capital you invest.

Some points here have not been confirmed against a primary source. Each is marked “Not yet verified”, and this page stays out of search until they are.

By Raise Sonar. Published 4 Nov 2026.

Route	What it is	What shareholders can expect	Source
UK administration	An administrator takes control and may sell the business as a going concern	Only what is left after creditors	GOV.UK (opens in a new tab)
UK liquidation	Assets are sold to pay debts	Any money left, which in an insolvent liquidation means none	GOV.UK (opens in a new tab), Republic Europe (opens in a new tab)
UK strike-off	A company that has stopped trading is removed from the register	Nothing to claim from it, once it no longer legally exists	GOV.UK (opens in a new tab)
UK pre-pack	A sale arranged before administration and completed at or right after it	Paid only after creditors, like any administration	Insolvency Service (opens in a new tab)
US Chapter 7	The estate is sold, and each class is paid in full before the next	Last, under the debtor's residual class	US Courts (opens in a new tab), 11 USC 726 (opens in a new tab)
US Chapter 11	The business reorganises under a plan	In most cases the plan cancels existing shares	SEC (opens in a new tab)

Who gets paid first?

In the UK the order (opens in a new tab) runs: fixed-charge holders, the insolvency practitioner's fees, preferential creditors, secondary preferential creditors including HMRC for some taxes, a prescribed part, floating-charge holders, ordinary unsecured creditors, then shareholders. The Insolvency Act (opens in a new tab) sends any surplus to members according to their rights.

The US works the same way. In Chapter 7 each class must be paid in full (opens in a new tab) before the next lower class, and the last class (opens in a new tab) is the debtor itself, which is where shareholders sit in practice. The SEC says that in most Chapter 11 cases the plan will cancel existing shares (opens in a new tab).

Does it matter whether you hold shares, a note or a SAFE?

It can, on paper. A convertible note is a loan (opens in a new tab) until it converts, so it should rank with debts. Preferred stock has a liquidation preference over common. A SAFE depends on its document: Y Combinator's form (opens in a new tab) pays your money back on dissolution, junior to debts, on par with other SAFEs and preferred, senior to common, while one Crowd SAFE we read (opens in a new tab) ranks equally with other SAFEs and common, after preferred.

Not yet verified We found no primary source on how a court ranks a SAFE in an insolvency, so treat these as what the documents say and not as settled.

UK investors with EIS or SEIS shares have no choice here: those shares must carry no special rights to the company's assets (opens in a new tab) if it closes down. SAFE vs equity vs convertible note in crowdfunding compares the instruments.

What is a pre-pack, and why does it matter?

A pre-pack is a sale arranged before a company enters administration (opens in a new tab) and completed on or very soon after it. In the first eight weeks a sale to a connected buyer needs creditor approval or an evaluator's report. Connected includes someone with a third of the votes.

The business can carry on under a new owner while the old company's shares are left behind. Shareholders rank last (opens in a new tab), so unless the price clears every creditor, they receive nothing, and the brand you backed may keep trading. Our BrewDog case shows a sale out of administration that paid small investors nothing.

What will your platform do?

Republic Europe. Its nominee monitors filings and posts on the business's page (opens in a new tab), and emails if a distribution is confirmed. It says you will not receive any distribution from a creditors' voluntary liquidation. It also says it is more likely than not (opens in a new tab) that a business will fail, and that it may write off the investment and dispose of the shares.
Not yet verified Crowdcube. Its help centre refused our reader on 4 November 2026. Search results for its page (opens in a new tab) say either the business or Crowdcube will contact you.
StartEngine. Its FAQ (opens in a new tab) says the company or its trustee is responsible for tax documents.
Not yet verified Wefunder. Search results for its page (opens in a new tab) say you will likely lose your entire investment. We could not read how it tells investors.

Our Republic Europe profile and Crowdcube profile have what else we hold on each.

Will anyone compensate you?

No. The FCA says you won't have access to the Financial Services Compensation Scheme (opens in a new tab). FSCS itself says it does not cover poor investment performance (opens in a new tab), and that its £85,000 limit is for a provider that fails owing you money, which is a different event from a company you invested in failing. EU investments are not covered (opens in a new tab) by deposit guarantee or investor compensation schemes.

How do you claim a loss in the UK?

Negligible value. While you still own shares that have become worth next to nothing (opens in a new tab), you can treat them as sold. You can date that up to two years before the start of the tax year of the claim, if they were already negligible then.
After dissolution. You cannot make that claim. The dissolution is the disposal, and you report the loss.
What HMRC may accept. Its manual (opens in a new tab) lets staff accept claims under £100,000 on a UK company, not a PLC, in liquidation and insolvent, or ceased with no assets.
Share loss relief. A loss on shares you subscribed for can be set against income of that or the prior year, before allowances (opens in a new tab). A nominee holding is allowed. The deadline is a year after the 31 January following the tax year.
EIS and SEIS. EIS shares qualify automatically (opens in a new tab), and SEIS has no automatic entitlement. They are outside the £50,000 or 25% cap (opens in a new tab). Administration, or winding up for genuine commercial reasons (opens in a new tab), does not of itself withdraw EIS relief.

For a 40% taxpayer with no other relief, a £10,000 loss set against income gives back £4,000, on those rules (opens in a new tab), leaving £6,000 lost. EIS and SEIS on Crowdcube and Republic Europe works the same example with the income tax relief taken into account.

How do you claim a loss in the US?

A security that becomes worthless is treated as sold on the last day of the tax year (opens in a new tab), and this covers a right to subscribe for or receive stock. You report it on Form 8949 (opens in a new tab), and refund claims can go back up to seven years. A net capital loss offsets US$3,000 of other income a year (opens in a new tab).

Small business stock can do better. Section 1244 (opens in a new tab) allows an ordinary loss of up to US$50,000, or US$100,000 on a joint return, for an original holder of stock in a company with capital up to US$1m.

Not yet verified We found no IRS statement on how a worthless SAFE is treated, so a tax adviser is the person to ask.

How will you find out?

Possibly slowly. A US company must file an annual report (opens in a new tab) within 120 days of the year-end until a listed event ends the duty, including liquidation or dissolution, and then a Form C-TR (opens in a new tab) within five business days. SEC staff say missing reports may reflect business failures (opens in a new tab), and that they lack data on issuers that liquidated.

A Form C-W is something else: it withdraws an offering and does not tell you a company has failed. In the UK, Companies House filings show an insolvency, which is what Republic Europe's nominee (opens in a new tab) says it watches.

How often does this happen?

Often. Beauhurst (opens in a new tab) found that 20% of UK crowdfunding rounds from 2011 to 2021 went to companies that have since gone under, against 12% of venture rounds. Those are one data provider's figures, counted by round, and a further 57% had stagnated. We found no comparable figure for the US or the EU. Our exits pages set the failures beside the wins, and How to evaluate a crowdfunding deal covers what you can check beforehand.

Frequently asked questions

Can you lose more than you invested?

We found no rule making a shareholder pay a company's debts after the shares are fully paid. The FCA's warning (opens in a new tab) is that you might lose all the money you have invested, and a convertible note or other form may differ, so the terms are worth checking.

Do you still own shares after the company is dissolved?

No. Once it no longer legally exists (opens in a new tab), there is nothing to own, and HMRC treats the dissolution as a disposal (opens in a new tab).

Can you sell before it fails?

Only if a route exists and someone will buy: How to sell crowdfunded shares covers that.

Does EIS or SEIS relief get clawed back when a company fails?

Not because of a failure alone: for EIS, HMRC says (opens in a new tab) administration or a genuine commercial winding up does not of itself withdraw it.

Sources

About the author

Raise Sonar is an information service that tracks equity crowdfunding raises and is not a broker-dealer, funding portal or crowdfunding service provider. Our guides are researched from primary sources, linked above, and a point we could not confirm on one is marked. About Raise Sonar