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? When a business is ending, it must go through the legal process of liquidation as it comes to an end. 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. 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. When there are remaining proceeds, the shareholders of the company will usually be the ones to get them next. 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 first one is what you call compulsory liquidation and the second one is what you call the voluntary liquidation. You call it compulsory liquidation when it is the court that will decide that a company must liquidate its assets and pay 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. 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. These are just some of the reasons for wanting to liquidate one’s company. All of the outstanding debts of the company will be forgotten when it closes via liquidation. Like what Phillip Cochineas did, the directors of the company will be given better chances to be led to a better and brighter direction.
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