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Important Liquidation Facts and Tips

A lot of news regarding liquidation might have come across you as you carry out your daily business struggles such as that handled by Phillip Cochineas. What is basically the whole deal with liquidation and its real meaning? 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. 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.

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. Creditors are the first ones in line who will get the profit of the assets that are sold by the business. 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.

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. 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. 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 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.

Not being able to keep up with the competition and the recent changes in the market are the two common reasons why companies can no longer pay their debts. It is then expected that liquidation of the company will most likely take place. If a company closes because of liquidation, whatever debts the company has will all be forgotten. 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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