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? As any business entity or company comes to an end, it is crucial for it to have to go through the legal process called liquidation. 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.
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. Liquidation is thus done so that the control of the assets of the company will go to the creditor. All these assets will then be sold by the creditor to interested buyers so that they can make as much money out of them. Usually, the creditors will take charge in the assets that they can sell coming from the company. When there are remaining proceeds, the shareholders of the company will usually be the ones to get them next. And then, even among shareholders, the ones that get more say about the remaining profit of the assets will be the preferred shareholders with only the common shareholders being next in line.
There are basically two major kinds of liquidation. The first kind of liquidation is what you call compulsory and the second kind of liquidation is what you call voluntary. In compulsory liquidation, the court of the land is the one to make orders to the company to have their assets liquidated in order for them to pay off their debts to their creditors. It is very much different with voluntary liquidation as there is still a need to file a petition for liquidation to the court of law as done by either the contributor, the company itself, or the creditor. 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. Typically, shareholders of the business entity get to have a say in voluntary liquidation for the company to be dissolved.
A lot of companies come to the point of not being able to pay off their debts when they have more competition or when there is a significant change in the market that they can no longer deal with. Company liquidation is thus bound to ensue. All of the outstanding debts of the company will be forgotten when it closes via liquidation. This allows the directors of the company to look at other business chances just like what was done by Phillip Cochineas.