Liquidating business definition

Posted by / 10-Jun-2014 04:21

Liquidating business definition

In United Kingdom and United States law and business, liquidation is the process by which a company (or part of a company) is brought to an end, and the assets and property of the company are redistributed.

Liquidation is also sometimes referred to as winding-up or dissolution, although dissolution technically refers to the last stage of liquidation.

You can choose to liquidate your limited company (also called ‘winding up’ a company).

Liquidation may either be compulsory (sometimes referred to as a creditors' liquidation) or voluntary (sometimes referred to as a shareholders' liquidation, although some voluntary liquidations are controlled by the creditors, see below).

If a business is being liquidated due to bankruptcy, then the funds raised are first used to pay creditors; if there is any cash remaining after creditors have been paid, the residual amount is distributed among the shareholders.

The order of preference for being paid when an entity is liquidated (known as the priorityof claims) is as follows: The price received for a company's assets can be lower than expected if the sale is conducted on a rush basis.

This is because the seller does not have sufficient time to locate the largest possible pool of potential buyers, so that the few buyers contacted can bid lower and still expect to achieve the winning bids.

Consequently, a common outcome of liquidation is that no residual funds are left over to pay stockholders.

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is the process of selling off all the assets of an entity, settling its liabilities, distributing any remaining funds to shareholders, and closing it down as a legal entity.