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. 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. 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. When there are remaining proceeds, the shareholders of the company will usually be the ones to get them next. Mostly, the preferred shareholders will gain more favor from the what is left from the proceeds of the assets and the next ones are then 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. 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. Most of the time, the decision to wind up and dissolve the company is all the doing of the shareholders of the company thus the need to have voluntary liquidation.
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 allows the directors of the company to look at other business chances just like what was done by Phillip Cochineas.