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? 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.
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. It will then be the creditor who will be given some power what they want to do with all assets of the company. In order for the creditors to receive money from these assets, they would rather have them sold to another company or person. Creditors are the first ones in line who will get the profit of the assets that are sold by the business. 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.
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. You call it compulsory liquidation when it is the court that will decide that a company must liquidate its assets and pay 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. 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.
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. If a company closes because of liquidation, whatever debts the company has will all be forgotten. Like what Phillip Cochineas did, the directors of the company will be given better chances to be led to a better and brighter direction.