World Library  
Flag as Inappropriate
Email this Article

Liquidating dividend

Article Id: WHEBN0028293626
Reproduction Date:

Title: Liquidating dividend  
Author: World Heritage Encyclopedia
Language: English
Subject: Dividend, Liquidation, Retained earnings, Net income, Consolidation (business), Special dividend, Dividend cover
Collection:
Publisher: World Heritage Encyclopedia
Publication
Date:
 

Liquidating dividend

A liquidating distribution (or liquidating dividend) is a type of nondividend distribution made by a corporation to its shareholders during its partial or complete liquidation. Liquidating distributions are not paid solely out of the profits of the corporation. Instead, the entire amount of shareholders' equity is distributed. When a company has more liabilities than assets, equity is negative and no liquidating distribution is made at all. This is usually the case in bankruptcy liquidations. Creditors are always senior to shareholders in receiving the corporation's assets upon winding up. However, in case all debts to creditors have been fully satisfied, there is a surplus left to divide among equity-holders. This mainly occurs during voluntary liquidations of solvent corporations.

A dividend may be referred to as liquidating dividend when a company:

  1. Goes out of business and the net assets of the company (after all liabilities have been paid) are distributed to shareholders, or
  2. Sells a portion of its business for cash and the proceeds are distributed to shareholders.

Liquidating distributions can be viewed as a form of return of capital, in that the capital invested in the corporation by its owners is returned to them, rather than only the earnings.

See also

External links

  • Accounting for liquidating dividends (US GAAP)
This article was sourced from Creative Commons Attribution-ShareAlike License; additional terms may apply. World Heritage Encyclopedia content is assembled from numerous content providers, Open Access Publishing, and in compliance with The Fair Access to Science and Technology Research Act (FASTR), Wikimedia Foundation, Inc., Public Library of Science, The Encyclopedia of Life, Open Book Publishers (OBP), PubMed, U.S. National Library of Medicine, National Center for Biotechnology Information, U.S. National Library of Medicine, National Institutes of Health (NIH), U.S. Department of Health & Human Services, and USA.gov, which sources content from all federal, state, local, tribal, and territorial government publication portals (.gov, .mil, .edu). Funding for USA.gov and content contributors is made possible from the U.S. Congress, E-Government Act of 2002.
 
Crowd sourced content that is contributed to World Heritage Encyclopedia is peer reviewed and edited by our editorial staff to ensure quality scholarly research articles.
 
By using this site, you agree to the Terms of Use and Privacy Policy. World Heritage Encyclopedia™ is a registered trademark of the World Public Library Association, a non-profit organization.
 


Copyright © World Library Foundation. All rights reserved. eBooks from Project Gutenberg are sponsored by the World Library Foundation,
a 501c(4) Member's Support Non-Profit Organization, and is NOT affiliated with any governmental agency or department.