Corporate Liquidation

1. Realize non-cash asset to cash

2. Settle 3rd party obligations

3. Distribute remainder to shareholders

Steps in Corporate Liquidation

1. Statement of Affairs

   • Before liquidation

   • For preparation / planning purposes

   • Uses estimates

1. Statement of Realization and Liquidation

   • During and after liquidation

   • For reporting purposes

   • Uses actual amounts

Reports prepared under corporate liquidation

• Fully Secured

• Partially Secured

• Unsecured With Priority

  • Liquidation / Admin Expenses

  • Employee Compensation

  • Taxes

• Unsecured Without Priority

Types of Liabilities

• Pledged to Fully Secured Liabilities

• Pledged to Partially Secured Liabilities

• Free Asssets

Types of Assets

% = Net Free Assets / Total Unsecured Claims

Estimated Recovery Rate Formula

= Total Unsecured Claims - Net Free Assets

Or

= Total Liabilities @ NRV - Total Assets @ NRV

Estimated Deficiency Formula

Statement of Realization and Liquidation Format

Reminders

• Estimated Payments To:

  • Fully Secured Liabilities = Always 100%

  • Partially Secured = Secured Portion - 100% & Unsecured Portion - Est. Recovery Rate

  • Unsecured with Priority = Usually 100% but not guaranteed

  • Unsecured without Priority = Est. Recovery Rate

• SOA

  • Liabilities include the interest attachments and liquidation expenses

  • Prepaid asset is not realizable

• SORAL

  • Cash is not included

  • Amount included in “assets realized” section is equal to the Cash Proceeds not the CV

  • Assets not expected to be realized in the future as well as Liabilities not expected to be liquidated in the future are no longer included in the ending balances.

  • Total Debits > Total Credits = Loss on Realization and Liquidation

  • Total Debits < Total Credits = Gain on Realization and Liquidation

  • Gain / Loss on realization and liquidation is, essentially the movement in the Estate Equity (SHE) balance during the period.