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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. So, what is liquidation all about? When a business is ending, it must go through the legal process of liquidation as it comes to an end. 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.

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. 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. 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 one is what you call compulsory liquidation and the second one is what you call the voluntary liquidation. 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. 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. Typically, shareholders of the business entity get to have a say in 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. If a company closes because of liquidation, whatever debts the company has will all be forgotten. This allows the directors of the company to look at other business chances just like what was done by Phillip Cochineas.