HKSI Paper 8 Overview of securities investments question: Kowloon Harbour Ltd

Answer: B. Mrs Ho, as a creditor, is paid before Mr Ip, who has a residual claim

A bond is a loan to the issuer, so the bondholder is a creditor. In a winding-up creditors are paid before any shareholders, and ordinary shareholders take only what is left after all creditors and any preference shareholders (a residual claim). So Mrs Ho ranks ahead of Mr Ip. Preference shareholders rank ahead of ordinary shareholders but behind every creditor, so Mrs Ho does not wait for them. Equity never ranks equally with debt, even after secured creditors are paid, and the order in which shares and bonds were issued does not change the ranking. Source: Standard capital structure (debt ranks ahead of equity in a winding-up); HKSI Prep note: Overview of securities investments (as at October 2026).