Which of the following is true of liquidation of a corporation?
A) Liquidated assets are used first to pay contract rights of shareholders.
B) Common stock has a priority over stock with a liquidation preference.
C) Voluntary liquidation is carried out by the corporate officers.
D) A court-appointed receiver may conduct involuntary liquidation.

Question

Quizplus · Accepted Answer

A court-appointed receiver may conduct involuntary liquidation if the corporation is unable to pay its debts and creditors seek to recover their claims through legal action. Liquidated assets are used first to pay creditors, with any remaining funds distributed to shareholders based on their priority of claim (which may give preference to certain classes of preferred stock). Common stock generally has the lowest priority in liquidation. Voluntary liquidation can be carried out by either the corporate officers or through shareholder approval.

Which of the Following Is True of Liquidation of a Corporation