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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? 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. During this process, the assets of the company will be sold off to interested buyers and then the resulting proceeds will serve as payment for the creditors. 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. Liquidation is thus done so that the control of the assets of the company will go to the creditor. All these assets will then be sold by the creditor to interested buyers so that they can make as much money out of them. 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.

There are basically two major kinds of liquidation. 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. Typically, shareholders of the business entity get to have a say in 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. 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 allows the directors of the company to look at other business chances just like what was done by Phillip Cochineas.

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