In liquidating

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.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.As said earlier, not all liquidation is as a result of insolvency.

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The collection of assets belonging to a debtor to be applied to the discharge of his or her outstanding debts.

A type of proceeding pursuant to federal Bankruptcy law by which certain property of a debtor is taken into custody by a trustee to be sold, the proceeds to be distributed to the debtor's creditors in satisfaction of their claims.

Any cash that remains is then distributed to preferred shareholders, if any, before common shareholders get a cut.

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.

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.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.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.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.The petition for voluntary liquidation is filed by shareholders when it is believed that the company has achieved its goals and purpose.

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