Practical Law Glossary Item 3-567-9625 (Approx. 3 pages)
Any one of a defined set of events that commonly trigger a distribution of a company's assets to its securityholders according to the liquidation preference or waterfall provision set out in a company's organizing documents. A deemed liquidation ensures that preferred securityholders receive a return on their capital before any other distribution of cash or assets is made to other securityholders, including common securityholders.
A deemed liquidation sometimes includes a qualified IPO or an exclusive license of intellectual property, however, these trigger events are commonly qualified. For example, a dollar threshold may be set and any IPO or license below that threshold is not a deemed liquidation.