The Significance of Liquidation in Your Business
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? 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. 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. What most creditors do is they sell them off so that they can make as much money from them as they can. 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. Usually, the preferred shareholders get to have a say on what is left over 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. It is very much different with voluntary liquidation as there is still a need to file a petition for liquidation to the court of law as done by either the contributor, the company itself, or the creditor. 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.
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. 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.