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 ?
Maug and Kahn and High liquidate suggest that greater liquidity can be an opportunity for large shareholders to increase their profit by monitoring the firm's management.
The Spanish bank is looking to liquidate Real Estate Investment Society Espana, in which it has a 31 per cent stake.
The Resolution to liquidate a legal person shall be passed by a qualified majority vote of members of a legal person.
Clarion decided to liquidate the wholly owned subsidiary because it will transfer the procurement role to Clarion (Hong Kong) Industries Co.
The purchaser may buy the stock of the shareholders and then liquidate the corporation to acquire the assets.
The Department of Social Welfare and Development (DSWD) released a 'shame list' of local government units (LGUs) that have failed to liquidate funds from the agency's daycare feeding program.
In addition, pursuant to the fund's Plan of Liquidation, it signed a liquidating trust agreement to complete the final wind-up of its affairs and liquidate its assets.
"The Texas Credit Union Department made the decision to liquidate County & Municipal Employees Credit Union and discontinue operations after determining the credit union was insolvent with no prospect for restoring viable operations on its own," according to the NCUA, which was named the liquidating agent.
74-462, management had decided to liquidate the corporation; however, it intended that a complete liquidation not occur until after substantial lawsuits that were pending against the company were resolved.
Before owners liquidate any business or professional practice, it is critical that they rescind or void any employment or noncompete agreements.
said Friday it will liquidate four overseas subsidiaries due mainly to their poor performance.
In 1963, the company decided to liquidate. It sold its properties, including the leases, in that year and went out of business.