Lets Take A Look At The Liquidation Process
Liquidation processes is a money-raising option are looked into by companies when they feel that there is a need to get rid of their debt without filing for bankruptcy. Under the liquidation process, companies usually sell off their tangible assets and use the money from the sale to pay off their creditors. With economies collapsing in most parts of the world, there are quite a few companies who are opting for such liquidation processes. When a company goes for liquidation of its assets, it does not mean that the company has shut down its business permanently. It only means that the firm would not be operating for some temporary period.
The liquidation process can be of three types and the first type is “members voluntary liquidation.” Under this kind of liquidation, the shareholders and other stakeholders of the company agree to the liquidation of the firm. The money raised through members voluntary liquidation usually exceeds the amount needed for paying off the company’s debts. Second type of liquidation is “creditors voluntary liquidation” and even in this process, shareholders and business partners are in agreement with the liquidation. The third type of liquidation is “compulsory liquidation” wherein the court of law orders the liquidation.
During the liquidation process, all business transactions are brought to a halt and all parties including shareholders, vendors and partners are notified of the liquidation. Only after the notification is done, the process of liquidation takes place. There may be many reasons why companies opt for liquidation. However, not all companies get bogged down after liquidation. There are many companies that emerge out of this financial crisis and reestablish themselves in the market like before.
The liquidator’s responsibility is to oversee the liquidation process. The liquidator would call for all the assets of the company and would sell them to creditors. If there are any assets left after sale to creditors, then that would be distributed among the partners and other members of the company. The liquidator must publish his appointment notice in the gazette in case of a liquidation ordered by the court. If the liquidation