Liquidating cash

03-May-2020 00:43

A liquidating cash dividend, on the other hand, occurs when the company doesn’t have enough profits or built up retained earnings to fund a cash distribution.It’s called a liquidating dividend because it takes money out of the company without sufficiently replenishing it with profits.Before you begin the process, consult with your attorney and accountant or a professional tax advisor to help you through the process.Moreover if you intend to liquidate assets to satisfy creditors, you may need to obtain their consent to do so.In this case, the contributed capital account is debited on the date of declaration.Many states have laws that restrict liquidating dividends in order to protect creditors.Companies that are thinly capitalized offer little recourse for even secured creditors in a bankruptcy situation.

In other words, a liquidating cash distribution gives some of the investors’ investment back to them.Rabin is an international company that specializes in creating liquidity for complex manufacturing facilities with idle or marginally productive assets.