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. 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. The process of liquidation is also referred as business dissolution or 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. For the assets of the company, it will be the part of the creditor to do something about them after the company has declared that they will have their assets liquidated. In order for the creditors to receive money from these assets, they would rather have them sold to another company or person. The first in line to get the proceeds of the assets sold off by the company are typically the creditors. If the creditors will have left something, the next in line who gets it will be the shareholders of the company. 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 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. On the other hand, in voluntary liquidation, the company, the contributors, or the creditors will be the ones to file a petition in the court of law for liquidation. 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. Typically, shareholders of the business entity get to have a say in voluntary liquidation for the company to be dissolved.

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. These are just some of the reasons for wanting to liquidate one’s company. 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.