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Important Liquidation Facts and Tips

You might have heard on the business news how Phillip Cochineas has helped built back their company after facing serious liquidation issues. What is basically the whole deal with liquidation and its real meaning? If you say liquidation, you are referring to a legal process that some business establishments go through if they need to put an end to their business. During this process, the assets of the company will be sold off to interested buyers and then the resulting proceeds will serve as payment for the creditors. Other names for the process of liquidation include business dissolution as well as winding up.

Oftentimes, the process of liquidation is well known to some people as a bold choice that some business establishments make when they come to the point in their business that they can no longer keep up with their debts. For the assets of the company, it will be the part of the creditor to do something about them after the company has declared that they will have their assets liquidated. In order for the creditors to receive money from these assets, they would rather have them sold to another company or person. Creditors are the first ones in line who will get the profit of the assets that are sold by the business. When there are remaining proceeds, the shareholders of the company will usually be the ones to get them next. Usually, the preferred shareholders get to have a say on what is left over the common shareholders.

If you talk about liquidation, it can go in two directions. The two major types are called compulsory liquidation as well as voluntary liquidation. You call it compulsory liquidation when it is the court that will decide that a company must liquidate its assets and pay their creditors. Meanwhile, if you talk about voluntary liquidation, there is a filing of petition for liquidation in the court of law either done by the creditors, the contributors, or even the companies themselves. This becomes a result if the company has debts that will wind up the company or cannot pay for the debts anymore. Usually, the shareholders of the company are the ones that support its voluntary liquidation for the company to be dissolved.

Not being able to keep up with the competition and the recent changes in the market are the two common reasons why companies can no longer pay their debts. Company liquidation is thus bound to ensue. All of the outstanding debts of the company will be forgotten when it closes via liquidation. This then gives the directors another direction for their company just like what Phillip Cochineas did.

Cite: Full Report