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Simple English definitions for legal terms
liquidating price
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A quick definition of liquidating price:
Term: Liquidating Price
Definition: The liquidating price is the price at which an asset is sold to pay off debts or distribute the remaining funds to shareholders. It is also known as the redemption price. When a company is closing down or going bankrupt, it may sell its assets at the liquidating price to pay off its creditors. The liquidating price is the final price at which the asset is sold, and it may be lower than the original purchase price.
Related Term: Liquidating Trust
Definition: A liquidating trust is a type of trust that is created to manage and distribute the assets of a company that is going out of business. The trust is responsible for selling the assets and distributing the proceeds to the creditors and shareholders. The purpose of a liquidating trust is to ensure an orderly and efficient liquidation process and to maximize the value of the assets for the benefit of all parties involved.
A more thorough explanation:
Definition: The liquidating price is the price at which an asset is sold to pay off debts or distribute the proceeds to shareholders. It is also known as the redemption price.
Example: If a company goes bankrupt, its assets may be sold off to pay its creditors. The liquidating price of each asset will be determined based on its market value at the time of sale. For example, if the company owns a building worth $1 million, the liquidating price may be set at $800,000 to ensure a quick sale.
Explanation: The example illustrates how the liquidating price is used to sell off assets to pay off debts. In this case, the building is sold at a lower price than its market value to ensure a quick sale and generate cash to pay off creditors. The liquidating price is important in bankruptcy proceedings as it determines how much money will be available to pay off debts and distribute to shareholders.