liquidation

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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 ?
If the corporation is retained, the shareholders indefinitely postpone the tax on the gain on the liquidating distribution, but the corporation is subject to a 10.
Prior to finally winding up its affairs under Delaware law, the Company intends to make at least one additional liquidating distribution to the holders of record of its common stock as of April 4, 2008.
Cloyses Partners, LLC provides advisory and direct management services to its clients, with particular expertise in liquidating trust, receiverships and interim management.
Because they did not take formal steps to ensure liquidation treatment, they may end up being taxed at ordinary income rates on the entire amount of the liquidating distribution (other than amounts previously taxed under the subpart F rules).
Since announcing the intent to form a liquidating trust, we have advised shareholders concerned about liquidity to consider selling their common shares prior to the cessation of trading," said Charles Knight, president and chief executive officer of AmeriVest.
The Plan provides for, among other things, the cancellation of High Voltage common stock and the establishment of the HVE Liquidating Trust.
331(a) to distribute all assets to Jack in the current year in a liquidating distribution in exchange for his stock.
The Notice and Application are available on the Liquidating Trust website (www.
The shareholder (Smith Partnership) will realize total gain of $400,000 ($500,000 liquidating distribution- $100,000 basis).
On September 29, 2006, the Liquidating Trustee for the TSLC I, Inc.
1990], the liquidating trustee in a Chapter 11 case did not file Federal tax returns.
Leveraging our highly-trained staff, we address this $60 billion problem by liquidating clients' excess inventory through eBay.