Liquidation Agreement

Liquidation refers to businesses closing down and converting all remaining assets into cash. Businesses go into liquidation for several reasons. It usually occurs when a company is in debt and cannot pay outstanding obligations, known as insolvency. Although rare, solvent companies can also enter into liquidation voluntarily.  

Regardless of the reason, organisations must define the liquidation process and appoint a liquidating partner to go through the necessary legal steps. This is done in a liquidation agreement, and anyone that needs such a contract is in the right place. On this page, you’ll find a downloadable liquidating agreement and step-by-step instructions on how to complete the template quickly and easily.

What Is a Liquidation Agreement?

A liquidation agreement – also known as a partnership termination agreement – is a contract negotiated as part of a settlement between two or more business partners, usually when dissolving a business. It explains the liquidation process and what debts the converted assets will cover.

It is important to note that a liquidation contract doesn’t formally terminate a joint venture or business partnership, nor does it remove the company from the business register. Rather, it is part of the settlement process while the business “winds up”. It ensures that—after the sale and purchase of remaining assets—things are settled fairly between both parties to help avoid disputes. Debts are then paid off, and the business can officially close its doors.

When Should a Liquidation Contract Be Used?

You can use our liquidation agreement template when dissolving any business. Perhaps you or your business partner are voluntarily dissolving the company, for example. Or maybe you’re being forced into dissolution due to failure to file or pay annual tax reports. Dissolution of business partnerships can also arise due to bankruptcy.

Regardless of the reason for terminating the business, defined liquidation terms are essential. These dictate who will be appointed as the liquidating partner and outline the liquidation process. Any proceeds from liquidated assets are typically used to resolve outstanding business debts, as explained in the liquidation terms.

Oftentimes, the original business partnership contract stipulates the liquidation terms. Here a liquidation agreement is unnecessary—the rights and responsibilities are already made clear. However, you will need to complete a contract liquidation form if this information is not included in the original contract as part of the winding down process.

What Should Be Included in a Liquidation Agreement?

Our liquidation agreement sample includes all required sections of the contract, ensuring it is comprehensive and legally binding. Below is a summary of all the necessary information you’ll need to input after you download and print our PDF form:

·        Partnership Description: The top of our liquidation form template is a section to input information about the joint venture. You must include the names of both businesses and define the partnership, which is especially crucial if the parties are in several agreements and the end date of the partnership agreement.

·        Statement of Dissolution: This section of the liquidating agreement template defines the dissolution process. This standard process requires the parties to file a dissolution to the Department of Treasury and every country clerk’s office in which the business routinely operates. The statement also explains the process for releasing the news to the public.

·        Liquidation Information: You must next detail information on the business liquidation, including the process for appointing an accountant and a liquidation partner. The section of the liquidation contract also describes how the proceeds will be used to pay off any outstanding partnership-related debt.

·        Governing Laws: There is a section on the form that outlines under what laws the liquidation agreement shall be governed. This depends on the jurisdiction in which the other legal proceedings for dissolving the partnership are being conducted. Regulations vary by state, so it is crucial to run all proceedings through the same courthouse.

·        Party Information: The final section of the form contains the names, addresses, and contact information for both parties involved in the liquidation agreement. Below you’ll find two signature boxes. Both parties must sign and date here to make the contract legally binding, and the liquidation process can commence.

How To Write a Liquidation Contract: Easy Steps

Writing a liquidation agreement might seem daunting for corporations, especially when dealing with the other aspects of winding down a business. If you’re struggling to know where to start, our liquidation form template keeps things simple. Below is a step-by-step guide on using our printable liquidation agreement sample to create a legal contract quickly and easily:

1. Download our liquidation contract template

Your first step is to download our liquidation form template. This printable PDF form contains all the standard legal clauses to make the contract official—all you have to do is fill in the blank spaces with the relevant partnership information. Our liquidation form format also adheres to current guidelines, as is required for the contract to be accepted by the courts.

2. Input all required information

Work through the liquidation contract, filling in the blanks with all necessary information. We listed everything you need to include in the agreement above. It’s a good idea to gather this ahead of time so you can complete the form in one sitting. Here is a reminder of everything you’ll need to hand:

• Definition of the business partnership or joint venture
• Termination date of the partnership agreement
• Name of the person being appointed as the liquidating partner
• State laws under which the contract is governed
• Names and contact information of each party

Ensure you fill in all the above information correctly before moving on to the next stage. Once both parties sign, the document is legally binding, so double-check all information carefully.

3. Sign the liquidation contract

To make the liquidation agreement legally binding, it needs to be signed and dated by both parties. It is always advisable to have a professional lawyer check the contract before writing your signature to check that there are no paperwork errors.

You should make two copies of the signed form for both parties to hold onto for record-keeping purposes. It is wise to keep a copy until the liquidation process is done and the distribution of assets and liabilities is complete. Your attorney can store the form on your behalf and dispose of it once the process is completed.