Company liquidation
In one sentenceWinding up the company's business after its dissolution by selling its assets, collecting its receivables, and paying its debts, then distributing what remains to the partners.
Simply put
Liquidation begins after a cause for dissolution, such as the end of the term, a partners' decision, or the achievement of its purpose, and a liquidator is appointed to take over management from the manager. If the company's assets are not enough for its debts, the liquidation follows the Bankruptcy Law.
Order of priority: debts first, then the partners' capital is returned, then the surplus is distributed. Final returns are filed and the commercial registration is cancelled after the liquidation ends.
Worked example
A company whose two partners (50% each) decided to liquidate it. The liquidator sold the assets for 1,300,000 SAR after liquidation expenses, the debts are 500,000 SAR, and the capital is 600,000 SAR.
Remaining after debts: 1,300,000 − 500,000800,000 SAR
Capital returned to each partner: 600,000 × 50%300,000 SAR
Surplus: 800,000 − 600,000200,000 SAR
Each partner's share of the surplus: 200,000 × 50%100,000 SAR
What each partner receives: 300,000 + 100,000400,000 SAR
Don't confuse it with
BankruptcyLiquidation may be of a company able to pay its debts, while bankruptcy is a state of inability to pay with its own procedures.