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Short Course on Options – What You Should Know

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? 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. Once a business is liquidated, all of its assets will be sold to other people and companies and the proceeds will immediately go straight to the creditors to pay them. This is why some people refer to liquidation as winding up or having their business undergo dissolution.

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. 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. 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 two major types are called compulsory liquidation as well as 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. 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. 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.

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. Company liquidation is thus bound to ensue. 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.

Category: Financial