Liquidation is the means by which a company or person generates immediate capital to settle outstanding debts that have been incurred. With the U.S. economy in a slump it is an alternative that more and more people and businesses are choosing to resolve negative financial circumstances. In general there are three types of liquidation procedures that are implemented and they are as follows.
The first type of liquidation is commonly referred to as member’s voluntary liquidation. With this type of liquidation process the shareholders or partners in a company have voluntarily decided to liquidate assets to settle outstanding debts and the value of the assets outweighs the amount of the outstanding debts.
The second type of liquidation is called creditors voluntary liquidation and it is when the shareholders or partners in a company have decided to liquidate company assets to settle outstanding debts that are owed and the debt outweighs the value of the assets that are to be liquidated. This second type of liquidation is the most common type of liquidation process.
The third type of liquidation process is referred to as compulsory liquidation and it is a liquidation process that is ordered by a court as part of a bankruptcy or insolvency proceedings to resolve outstanding debt. With compulsory liquidation the control of the company is handed over to receivers whose job it is to determine the value of the companies’ assets and to also notify all of the shareholders that it is in the process of going through liquidation.
Companies’ assets may include a number of things including hard tangible assets and it also can include such things as patents or any one of a number of forms of paper assets. Because a company is going through a liquidation process to solve outstanding debts does not necessarily mean that the company is going out of business permanently.
Written by Jerry Mortimer. Find the more information on the latest
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