Liquidating definition

05-May-2020 08:29 by 6 Comments

Liquidating definition - gerard way dating

A common reason for liquidation is for the directors/shareholders to close a company which has accumulated large reserves and to realise the value in a tax efficient way.

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realise the value of their assets to pay off their debts.

A liquidation process is not solely due to a business becoming insolvent.

Assets are distributed based on the priority of various parties’ claims, with a trustee appointed by the Department of Justice overseeing the process.

The most senior claims belong to secured creditors, who have collateral on loans to the business.

Unlike when individuals file for Chapter 7 Bankruptcy, the business debts still exist.

The debt will remain until the statute of limitation has expired, and as there is no longer a debtor to pay what is owed, the debt must be written off by the creditor.

Liquidation is not always the result of insolvency.

In fact many solvent companies are liquidated through a members voluntary liquidation process when they wish to realise the value of large accumulated reserves in a tax efficient way.

Finally, shareholders receive any remaining assets, in the unlikely event that there are any.

In such cases, investors in preferred stock have priority over holders of common stock.

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