liquidation

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Related to Compulsory liquidation: Winding Up Order

Liquidation

Occurs when a firm's business is terminated. Assets are sold, proceeds are used to pay creditors, and any leftovers are distributed to shareholders. Any transaction that offsets or closes out a long or short position. Related: Buy in, evening up, offset liquidity.

Liquidation

The conversion to cash. Liquidating a position may simply mean selling stock or bonds; the seller in this case receives the cash. Liquidation also refers to a situation in which a company ceases operations and sells as many assets as it can; the company uses the cash to repay debt and, if possible, shareholders. Liquidation often has a negative connotation for this reason. See also: Panic selling.

liquidation

1. The conversion of assets into cash. Just as a company may liquidate an entire subsidiary by selling it to another firm, so too may an investor liquidate by selling a particular type of security.
2. The paying of a debt.
3. The selling of assets and the paying of liabilities in anticipation of going out of business.
Case Study If eliminating dividends, laying off employees, selling subsidiaries, restructuring debt, and, finally, reorganization under Chapter 11 bankruptcy fail to resuscitate a business, the likely outcome is liquidation. Early 2001 witnessed the end of the line for Tennessee-based retailer Service Merchandise, a 42-year-old chain of catalog showrooms that proved unable to compete with large discounters such as Wal-Mart. Following a three-year attempt at reorganization under Chapter 11 bankruptcy, the firm announced it would close all 216 stores and liquidate its inventories and real estate. It was expected the asset liquidation would result in creditors being paid only a portion of their claims while stockholders of the company would receive nothing. The firm's stock was trading over the counter for 2¢ per share at the time of the announcement.

liquidation

the process by which a JOINT-STOCK COMPANY'S existence as a legal entity ceases by the winding-up of the company Such a process can be initiated at the behest of the CREDITORS where the company is insolvent (a compulsory winding-up), or by the company directors or SHAREHOLDERS, in which case it is known as a voluntary winding-up.

The person appointed as liquidator, either by the company directors/shareholders or by the creditors, sells off the company's ASSETS for as much as they will realize. The proceeds of the sale are used to discharge any outstanding liabilities to the creditors of the company. If there are insufficient funds to pay all creditors (INSOLVENCY), preferential creditors are paid first (for example the INLAND REVENUE for tax due), then ordinary creditors pro rata. If there is a surplus after payment of all creditors this is distributed pro rata amongst the ordinary shareholders of the company. See also LIMITED LIABILITY, SHAREHOLDERS, CAPITAL.

liquidation

the process by which a JOINT-STOCK COMPANY's existence as a legal entity ceases by ‘winding up’ the company. Such a process can be initiated at the behest of the CREDITORS where the company is insolvent (a compulsory winding-up) or by the company directors or SHAREHOLDERS, in which case it is known as a voluntary winding-up.

The person appointed liquidator, either by the company directors/shareholders or the creditors, sells off the company's ASSETS for as much as they will realize. The proceeds of the sale are used to discharge any outstanding liabilities to the creditors of the company. If there are insufficient funds to pay all creditors (INSOLVENCY), preferential creditors are paid first (for example, the INLAND REVENUE for tax due), then ordinary creditors pro rata. If there is a surplus after payment of all creditors, this is distributed pro rata amongst the shareholders of the company. See also LIMITED LIABILITY, SHAREHOLDERS.

Liquidation

The process of converting securities or other property into cash.
References in periodicals archive ?
Mr Thomas added, "Forcing a company into compulsory liquidation should be the last resort.
A spokesman for The Official Receiver said: 'The firm has been placed into compulsory liquidation.
He also highlighted a rise in the number of creditors forcing companies into compulsory liquidation due to bad debt.
The company was put into compulsory liquidation by Birmingham District Registry on the petition of a creditor owed more than pounds 9,000.
The company was placed into compulsory liquidation in December 2001 under the application of the joint administrators, with a cash deficiency of pounds 1,314,287.
A statement released by the Official Receiver said they may examine a director of a company in compulsory liquidation in open court before a judge and under oath.
Application submitted for Commencement of Compulsory Liquidation Proceedings by Yamaichi Tochi Kabushiki Kaisha and Sanryou Estate Kabushiki Kaisha; Eventual Possibility of Credit Losses Mitsubishi Tokyo Financial Group, Inc.
It was put into compulsory liquidation over an unpaid PS18,000 tax bill.
Compulsory liquidation is when the court makes an order for the company to be wound up on the petition of an appropriate person - the director(s) of the company or a creditor.
The petition was heard on Thursday, September 21, 2005, and the company was ordered into compulsory liquidation by Mr Registrar Rawson.
The firm was placed into compulsory liquidation by the High Court, Leeds, last year on the petition of HM Customs & Excise in respect of unpaid VAT tot alling pounds 4, 800.
It was placed in compulsory liquidation by Durham County Court on September 24, 2002, on the petition of Customs and Excise over unpaid VAT.

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