Important Liquidation Facts and Tips
A lot of news regarding liquidation might have come across you as you carry out your daily business struggles such as that handled by Phillip Cochineas. Now, why do you always hear liquidation and what does it mean? 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. The process of liquidation is also referred as business dissolution or winding up.
Most of the time, what people understand about the process of liquidation is that this is the option that some companies go to if they need to pay 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. What most creditors do is they sell them off so that they can make as much money from them as they can. The first in line to get the proceeds of the assets sold off by the company are typically the creditors. It will be the shareholders of the company next who will be getting the remaining proceeds from the assets sold and left off by the creditors. 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 first kind of liquidation is what you call compulsory and the second kind of liquidation is what you call voluntary. It will be the power of the court to order a compulsory liquidation among business establishments if they need to liquidate their assets so that their creditors can be paid off. On the other hand, in voluntary liquidation, the company, the contributors, or the creditors will be the ones to file a petition in the court of law for liquidation. This is the most likely scenario if a company has debts that are prone to winding up the company or if the company cannot anymore pay off their existing debts. 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. These are just some of the reasons for wanting to liquidate one’s company. When a company is closed via liquidation, all outstanding debts will be paid off. This allows the directors of the company to look at other business chances just like what was done by Phillip Cochineas.