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Posted by / 01-Jul-2015 09:21

Liquidating assets definition

The firm's stock was trading over the counter for 2¢ per share at the time of the announcement.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.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.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. Assets are sold, proceeds are used to pay creditors, and any leftovers are distributed to shareholders. Liquidating a position may simply mean selling stock or bonds; the seller in this case receives the cash.Any transaction that offsets or closes out a long or short position. 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. 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.

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 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.

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If there is a surplus after payment of all creditors this is distributed pro rata amongst the ordinary shareholders of the company. the process by which a JOINT-STOCK COMPANY's existence as a legal entity ceases by ‘winding up’ the company.

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