Legal Definitions - liquidating price

A liquidating price refers to the value at which an asset, a share, or an interest in a company or fund is bought back, sold, or distributed to investors or owners during the process of winding down operations, dissolving an entity, or converting assets into cash. It is the price determined when an entity is being liquidated, rather than operating as a going concern.

• Example 1: Small Business Closure

  Imagine "Bright Ideas Inc.," a small design firm, decides to permanently close its doors. After selling all its office furniture, computers, and intellectual property, and settling all outstanding debts, the remaining cash is distributed among its shareholders. The specific amount of cash per share that each shareholder receives in this final distribution is considered the liquidating price for their shares.

  Explanation: This illustrates the liquidating price because it's the final value shareholders receive for their ownership interest as the company ceases to exist and converts all its assets into cash for distribution.

• Example 2: Investment Fund Wind-Down

  Consider "Global Growth Fund," an investment fund that announces it will be closing down and returning capital to its investors. Over several months, the fund sells off all its holdings, which include various stocks, bonds, and real estate investments. Once all assets are sold and administrative costs are covered, the total proceeds are divided among the unit holders. The value per unit that each investor receives upon the fund's termination is its liquidating price.

  Explanation: Here, the liquidating price is the value at which the fund's assets are effectively "cashed out" and returned to investors as the fund ceases operations, representing the final payout for their investment units.

• Example 3: Partnership Dissolution

  Suppose two partners, Sarah and Tom, decide to dissolve their architectural partnership, "Apex Designs." They agree to sell their office building, client contracts, and other business assets. After paying off any business loans and outstanding invoices, the remaining funds are split between them according to their partnership agreement. The specific amount of money Sarah receives for her share of the partnership's assets after liquidation is her liquidating price.

  Explanation: This example shows the liquidating price as the final financial distribution to an owner (Sarah) when a business entity (the partnership) is wound down and its assets are converted to cash.