Today there are many people dealing with financial struggles. For this reason there are many options that are available to you that can help you deal with these stressful issues. Liquidation is one such option that is the process of turning a company's hard assets including buildings, furniture, patents, and copyrights into cash.
The cash that is accumulated from liquidation is used to pay off existing debt or to reap personal benefit. There are three main types of liquidation including members' voluntary creditors' voluntary, and compulsory liquidation. Members' voluntary liquidation is when the shareholders of a company decided to put it into liquidation and the assets positively outweigh the debts, meaning the company is solvent.
Creditors' voluntary liquidation is when the shareholders of the company decided to put it into liquidation and the debts of the company outweigh the assets, meaning the company is insolvent. This is the most common type of liquidation.
The last type of liquidation is known as compulsory liquidation which is when a court orders a receiver or liquidator to analyze a company's assets and decide what is the best order to pay off debts. When a company is going in to liquidation it is important that the director insures that all trading has ceased so that the company doesn't get into further credit problems.
It is required that directors hand over their control to official receivers (ORs) or liquidators who are able to tell a company's creditors and contributors (such as shareholders) that the company is being liquidated. Liquidation does not mean the end is near for a company. There are also some possible alternatives to liquation that may be helpful for your company's current financial situation.
Some may still be confused about what the differences are between bankruptcy and insolvency. Bankruptcy is more commonly used for individuals while insolvency is more commonly used when regarding a business.
