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. 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. Once a business is liquidated, all of its assets will be sold to other people and companies and the proceeds will immediately go straight to the creditors to pay them. 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. It will then be the creditor who will be given some power what they want to do with all assets of the company. 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. 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.
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. 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. 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. It is then expected that liquidation of the company will most likely take place. When a company is closed via liquidation, all outstanding debts will be paid off. This then gives the directors another direction for their company just like what Phillip Cochineas did.