Duhaime's Law Dictionary


Liquidation Definition:

The converting of the the assets of a person into cash.

The selling of assets and the use of the cash proceeds to pay off creditors or to distribute to other entitled persons such as beneficiaries to an estate.

The process of liquidation involves an investigation as to assets and liabilities, an accounting thereof, the sale of assets to render those into negotiable form (i.e. cash), followed by the sale of assets (eg. auction), and the distribution of the proceeds of sale to creditors or others such as, in the case of an estate, to the beneficiaries.

In Dauphin Plains Credit Union Ltd. v. Xyloid Industries, Justice Pigeon of the Supreme Court of Canada adopted these words from a variety of sources:

"Liquidation: the act or operation of winding-up the affairs of a firm or company by getting in the assets, settling with its debtors and creditors, and apportioning the amount of each partner's or shareholder's profit or loss, etc.

"To ascertain and set out clearly the liabilities of (a company or firm) and to arrange the apportioning of the assets; to wind-up".

liquidationAt 37 Corp. Jur., p. 1265

"Liquidation, a word of French origin, is not a technical term, and, therefore, can have no fixed legal meaning; but it has a fairly defined legal meaning, and it is said to be a term of jurisprudence, of finance, and of commerce. It is defined as the act of settling, adjusting debts, or ascertaining their amounts or balance due; settlement or adjustment of an unsettled account ...

"Applied to a partnership or company ... the act or operation of winding up the affairs of a firm or company by getting in the assets, settling with its debtors and creditors, and appropriating the amount of profit or loss."

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