Define: Liquidation

Business, Legal & Accounting Glossary

Definition: Liquidation

What is the dictionary definition of Liquidation?

Dictionary Definition

  1. The act of exchange of an asset of lesser liquidity with a more liquid one, such as cash.
  2. The selling of the assets of a business as part of the process of dissolving the business.


Full Definition of Liquidation

Liquidation refers to a business whose assets are converted to money in order to pay off debt.

Liquidation (also known as winding-up) is one of the forms of “insolvency” in the English Courts and is used when the other methods of corporate recovery have failed. There are two forms of Liquidation – compulsory (or Court ordered winding-up) and voluntary (creditors or members winding-up). The purpose of a liquidation is to realise the assets of the company in order that the creditors of the company can be paid off.

Although the initial principle of liquidation was that the creditors would be paid off pari passu, i.e. all creditors would receive an equal share of the assets of the company in accordance with the debt they were owed, there are now a number of classes: debenture or fixed charge holders, preferential creditors, floating charge holders and unsecured creditors.

In terms of people, a liquidation is an execution, especially one carried out by an extra-judicial death squad or agency such as the KGB.


Cite Term

To help you cite our definitions in your bibliography, here is the proper citation layout for the three major formatting styles, with all of the relevant information filled in.

Page URL
Modern Language Association (MLA):
Liquidation. Payroll & Accounting Heaven Ltd. April 06, 2020
Chicago Manual of Style (CMS):
Liquidation. Payroll & Accounting Heaven Ltd. (accessed: April 06, 2020).
American Psychological Association (APA):
Liquidation. Retrieved April 06, 2020, from website:

Definition Sources

Definitions for Liquidation are sourced/syndicated and enhanced from:

  • A Dictionary of Economics (Oxford Quick Reference)
  • Oxford Dictionary Of Accounting
  • Oxford Dictionary Of Business & Management

This glossary post was last updated: 13th February, 2020