Lingo for Dummies: Receivership Vs Liquidation

Anonymous
Thu 01 Jun

So your favourite store is closing its doors for the last time and you’ve been left heartbroken, lying on the floor crying out, WHY? How did this happen?

This is a reality that we all experience at some point and we find little comfort in the explanation of ‘liquidation’ or ‘receivership,’ because, to be honest, we have absolutely no idea what either word means.

Well, let me spell it out for you!

 

Receivership

So let’s say that your company isn’t going too well and you owe a lot of money and are finding it hard to crawl out of the debt piled on top of you. Some of you may be hearing the magic word ‘bankruptcy’ at this point… and you’re sort of right!

Receivership is a form of corporate bankruptcy where a receiver (let’s call him Bill) is appointed by the bankruptcy courts as a governing body to oversee the management of assets to pay back the debt and avoid liquidation.

via GIPHY

Liquidation

Ok, so if you’re debt is really crushing down on top of you and you can’t seem to find a solution to pay it back, your company is declared insolvent.

Once this happens you by-pass Bill and business is brought to a close. Then your assets are divided up among your creditors and stakeholders to pay back some of the money that they are owed.