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? When a business is ending, it must go through the legal process of liquidation as it comes to an end. Since most businesses liquidated have to deal with creditors, the assets that they have left off will be sold to another company or person and whatever proceeds are made out of it will be given straight to the creditors as payment. This is why some people refer to liquidation as winding up or having their business undergo dissolution.
Usually, liquidation is thought of as the choice that business owners make when they can no longer pay for their accumulating 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. 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. 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.
When it comes to liquidation, there are basically two major kinds of them. 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. 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 usually takes place among companies that can no longer afford paying for their debts or have debts that will just end up winding the company up. Usually, the shareholders of the company are the ones that support its voluntary liquidation for the company to be dissolved.
If a company has debts that they cannot pay, they are most likely caused by a change in the market or an increase in competition. Company liquidation is thus bound to ensue. 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.