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The term "orderly" implies that the liquidation would allow for a reasonable time to identify all available buyers, and the seller would have control of the sale process.
This is different than a forced liquidation where the first available buyer is used and the seller does not have control of the sale process (typically the bank does).
The most senior claims belong to secured creditors, followed by unsecured creditors, including bondholders, the government (if the company owes taxes) and employees (if the company owes them unpaid wages or other obligations).
Preferred and common shareholders receive any remaining assets, respectively.
Appraisers will provide two values: a) the fair value and b) the orderly liquidation value along with the estimated useful life of the assets.
The idea behind this forced liquidation value is to get an estimate of the financial position of the company in the worst possible situation and circumstance.
As a return of capital, this distribution is typically not taxable for shareholders.
A liquidating dividend is distinguished from regular dividends that are issued from the company's operating profits or retained earnings.
However, computing the liquidation costs is a lengthy task by itself as it entails an in-depth analysis of the liquidation process and its circumstances for the business.
Due to these factors, the forced liquidation value of the company can sometimes be less than 25 percent of its fair market value.