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 ?
Liquidation World liquidates consumer merchandise from retailers, manufacturers and wholesalers through 98 stores in Canada and the United States.
JUNE 1--Southern Family and Atlantic Preferred will be placed into liquidation.
The dramatic increase in the past few years of limited liability companies (LLCs) treated as partnerships as the entity of choice has lead to an increase in liquidations of member interests.
There's little doubt that distributions of the tangible property to shareholders in a liquidation are taxable under section 336.
This safe harbor route to partial liquidation treatment not only sidesteps many thorny issues accompanying a genuine contraction analysis, but it may be undertaken without a significant reduction in the size of distributing's business.
The net assets in liquidation reported in this news release reflect management's current estimates of the net realizable value of the Corporation's assets and the settlement costs of the Corporation's liabilities.
Observation: If a partial liquidation is successfully effected, a shareholder is treated as selling an amount of stock having a value equal to the amount of the distribution.
Tripos plans to file a proxy statement with the SEC containing more detailed information about the proposed asset sale to Vector and other elements of its plan for liquidation and dissolution, including additional information about estimated proceeds to stockholders.
In other words, P can claim $70 of loss recognized on the deemed T liquidation (out of $85) to the extent of gains recognized by other group members on the T stock (i.
UMP, which placed itself into provisional liquidation in April 2002, won an order from the Supreme Court of New South Wales, clearing the way for the group to emerge from liquidation, said the liquidator, Deloitte associate David Lombe.
The Corporation is currently operating under a plan of liquidation and dissolution that was approved by shareholders in October 2000.
One of the most frequently criticized results under the current regulations involves the case of an intercompany sale (or distribution) of a subsidiary's stock, followed by a liquidation of the subsidiary.