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. 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. Other names for the process of liquidation include business dissolution as well as 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. Liquidation is thus done so that the control of the assets of the company will go to the creditor. All these assets will then be sold by the creditor to interested buyers so that they can make as much money out of them. Creditors are the first ones in line who will get the profit of the assets that are sold by the business. If the creditors will have left something, the next in line who gets it will be the shareholders of the company. 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. 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. 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 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. These are just some of the reasons for wanting to liquidate one’s company. 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.
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