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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. 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. The process of liquidation is also referred as business dissolution or winding up.

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. 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. If the creditors will have left something, the next in line who gets it will be the shareholders of the company. And then, even among shareholders, the ones that get more say about the remaining profit of the assets will be the preferred shareholders with only the common shareholders being next in line.

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. 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. 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. 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.

A lot of companies come to the point of not being able to pay off their debts when they have more competition or when there is a significant change in the market that they can no longer deal with. 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.