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. 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. 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.
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. 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. 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.
There are basically two major kinds of liquidation. 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. 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 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.
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. 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.