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Everything You Need to Know About Liquidation

You might have heard on the business news how Phillip Cochineas has helped built back their company after facing serious liquidation issues. Now, why do you always hear liquidation and what does it mean? If you say liquidation, you are referring to a legal process that some business establishments go through if they need to put an end to their business. 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. 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. 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. When there are remaining proceeds, the shareholders of the company will usually be the ones to get them next. 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 two major types are called compulsory liquidation as well as 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. 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. Usually, the shareholders of the company are the ones that support its voluntary liquidation for the company to be dissolved.

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. These are just some of the reasons for wanting to liquidate one’s company. When a company is closed via liquidation, all outstanding debts will be paid off. Like what Phillip Cochineas did, the directors of the company will be given better chances to be led to a better and brighter direction.