Liquidation is the process where a company's assets are converted into cash, typically as part of winding down business operations. This procedure can occur voluntarily, when business owners decide to bring operations to an end, or involuntarily, if creditors force a struggling company into liquidation to recover debts.
The primary goal of liquidation is to generate funds from the sale of assets and then distribute those funds to stakeholders such as creditors, employees, or company owners. Assets commonly liquidated include real estate properties, inventory, equipment, vehicles, and intellectual property.
The liquidation process generally follows a clear sequence: firstly, appointing a liquidator who oversees the liquidation and asset sales; secondly, selling company assets quickly but appropriately; and thirdly, distributing the proceeds according to predefined priorities—typically creditors receive payments first, followed by shareholders if any funds remain.
Companies facing financial distress, bankruptcy, or insolvency often resort to liquidation as a last business strategy. Understanding liquidation can help stakeholders manage expectations and navigate financial challenges more effectively.
