span three types of liquidation:
class="cap">T he member’s voluntary liquidation,
onset of globalization creditor’s voluntary liquidation,
brought about an increase in the and compulsory liquidation.
international flow of goods,
Member’s voluntary liquidation
services, capital, information, is when the owners of a company,
and technology. No one can ever meaning its shareholders,
predict how this rapid influx can stockholders or partners, choose
affect a country’s currency, to liquidate their assets in
stock markets, and other aspects order to settle their debts. In
of its economy. It seems that this kind of liquidation, the
volatility is inherently built decision is based on the free
into the economy of any country. will of the owners. Moreover, the
As such, many sectors of society amount that would be obtained
continue to be affected. One of from liquidating the assets is
them is the business sector as greater than the amount of the
can be seen in the number of outstanding debt. This means that
businesses that permanently close the company is solvent and that
down and sell their companies or it will still gain something from
leave them in a non-working the process.
condition.
Creditor’s voluntary
These affected businesses usually liquidation is when the owners of
turn to liquidation as a last a company choose to liquidate
resort. Liquidation refers to their assets in order to pay off
process of converting a company’s outstanding debts. Unlike in
assets like furniture, buildings, member’s voluntary liquidation,
copyrights, and patents into the company owners have no choice
cash. The cash is then used by but to resort to liquidation.
the company to pay off its Moreover, the amount of debts
outstanding debts. There are exceeds the amount they could get
from liquidating their assets, in the future and that it will
meaning the company is insolvent. have a hard time clearing its
The company would thus not be debts, liquidation is a good
able to benefit from it. In fact, solution, at least by resorting
there would still be a deficit to it even before the court
since the entire amount of the orders it to do so. By doing so,
debt would not be covered. This it will be able to avoid the
type of liquidation is the most stigma of compulsory liquidation.
common among the three. However, the most ideal solution
Compulsory liquidation, unlike is to prevent an imbalance in the
the other two types of credit standing of the company
liquidation, does not involve any and keep it in control.
decision-making by the owners of
the company. This happens when a
outstanding debts. Before align="center">
compulsory liquidation takes
place, the director ensures that all trading is ended so that the type="text/javascript">
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About the Author:
Wilson Field are leading insolvency practitioners that can provide free advice for Insolvency and Debt Problems. Benedict Smythe is a freelance article writer for Dolphin Promotions Ltd
Article Tags: company, debts, liquidation
