Liquidation Dividend Law and Legal Definition

Liquidation dividend is a dividend paid to a dissolving corporation’s shareholders. It is generally paid from the capital of the corporation, upon the decision to suspend all or part of its business operations. Liquidation dividend remains for shareholders after a firm sells its assets and pays off its creditors.

A liquidating dividend occurs when shareholders believe that the company is no longer sustainable or profitable. Therefore, liquidating dividends are considered a return of shareholders' investments, rather than profit on them. All of the corporation's debts must be paid before it can pay liquidating dividends.

Liquidation dividend is also termed as liquidating dividend.