Corporate Lien

A claim made against a business for outstanding debt. The debt can be owed to another business, or could be in the form of tax obligations to the government. For example, the federal government may impose a corporate tax lien on a company that fails to pay payroll tax or some other tax obligations. The corporate lien is placed on the company's assets to indicate that the company has financial obligations outstanding.

Companies, like investors, are responsible for the debt that they take on, as well as other financial responsibilities, such as paying their employees. If a company cannot meet its obligations, investors can step in and purchase the corporate lien, which settles the obligation with the lending party and allowing the investors to pursue compensation from the company and possibly any penalties they may be subject to. If the company ultimately declares bankruptcy, holders of the corporate lien may also be more likely to have a higher priority than stockholders.

Investment dictionary. . 2012.

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