Everything You Need to Know About Liquidation
If you part of the business industry, there is no doubt that you have encountered the name Phillip Cochineas in one of your readings as being linked to the liquidation of his company and is now building it back. 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. 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. It will then be the creditor who will be given some power what they want to do with all assets of the company. All these assets will then be sold by the creditor to interested buyers so that they can make as much money out of them. Usually, the creditors will take charge in the assets that they can sell coming from the company. 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. 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.
When it comes to liquidation, there are basically two major kinds of them. 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. On the other hand, in voluntary liquidation, the company, the contributors, or the creditors will be the ones to file a petition in the court of law for liquidation. This becomes a result if the company has debts that will wind up the company or cannot pay for the debts anymore. 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. It is then expected that liquidation of the company will most likely take place. 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.