Some Interesting Facts on Liquidation

By: James Keenen

In recent times more and more people have found themselves involved in, or effected by a liquidation or insolvency process. If you are one of these people then you may be a bit confused and on the surface it can sometimes seem worse then it actually is. The term "liquidation" describes the process by which a company goes through when it sells off assets to raise money to pay off creditors. For many companies liquidation is a new beginning, when they can get old debts off their back and get the breathing room that is needed to chart a new course.

Maybe there have been some bad decisions in the past and new management wants to sell off assets or equipment that is no longer needed to pay off suppliers that are no longer needed.

In this case liquidation can be a good thing that can be a new beginning for a troubled company. There are three basic types of liquidation proceedings that a company will go through if they are insolvent. The first type is called "members voluntary" liquidation and with this type of liquidation all of the share holders or partners have unanimously agreed to it and the total value of the assets to be sold off exceeds the amount of the debt that is owed to the companies creditors.

The next type of liquidation is called "creditors voluntary" liquidation and it is just like members voluntary liquidation, except that the amount of debt that is owed exceeds the value of the assets that are to be liquidated. The third type of liquidation process is called "compulsory" liquidation and this type of liquidation is ordered by a court. If you find yourself involved in a liquidation process then it is in your best interest to become fully informed on the process of liquidation.

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