What is Liquidation?

Liquidation is the process of disposing of all assets of a company in the event that it has defaulted on a loan or has gone bankrupt. In either event, the creditors who have loaned money secured against collateral to the firm take control of the company's assets, the proceeds from the sale of which are then distributed according to the status of the creditors (for example, certain types of bond holders have preference if being repaid over others).Any money that is left after all the creditors have been paid off, is given to shareholders in proportion to their shareholdings.