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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? 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. Other names for the process of liquidation include business dissolution as well as winding up.

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. 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. All these assets will then be sold by the creditor to interested buyers so that they can make as much money out of them. Creditors are the first ones in line who will get the profit of the assets that are sold by the business. 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.

When it comes to liquidation, there are basically two major kinds of them. The two major types are called compulsory liquidation as well as voluntary liquidation. 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. 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. 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. It is then expected that liquidation of the company will most likely take place. When a company is closed via liquidation, all outstanding debts will be paid off. This then gives the directors another direction for their company just like what Phillip Cochineas did.

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