Glossary

Liquidation is the process of selling a company's assets, typically to pay off its debts, creditors, and other financial obligations.

This usually occurs when a company is insolvent, meaning it is unable to meet its financial obligations. During liquidation, the company's assets are sold, and the proceeds are distributed among its creditors in a specific order, starting with secured creditors and ending with shareholders. 🏭

For example, if a retail store chain goes bankrupt, its inventory, equipment, and properties may be sold off to pay off debts and other obligations.

Fun fact: In some cases, companies may voluntarily undergo liquidation, even if they are not insolvent, to restructure their business or distribute assets to shareholders. This is known as a voluntary liquidation or members' voluntary liquidation. 🔚