Important Liquidation Facts and Tips
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? 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. Other names for the process of liquidation include business dissolution as well as winding up.
Most of the time, what people understand about the process of liquidation is that this is the option that some companies go to if they need to pay 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. The first in line to get the proceeds of the assets sold off by the company are typically the creditors. 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 kind of liquidation is what you call compulsory and the second kind of liquidation is what you call voluntary. 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. 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. Like what Phillip Cochineas did, the directors of the company will be given better chances to be led to a better and brighter direction.