Business liquidation is a process where a company or a part of a company is closed down. Nowadays, business liquidation is also known as dissolution, but it is only the last stage of the liquidation process.
Liquidation occurs not only in the case of bankruptcy, but also as many businesses sell in order to create funds. Business liquidation is mainly divided into two categories, which are:
• Voluntary business liquidation
• Compulsory business liquidation
Here is some information about voluntary liquidation:
Voluntary liquidation is a form of liquidation which is initiated by the directors and shareholders of a company. This step is taken when they think that their company is not profitable and sustainable. If the company has enough assets to pay off its debts to the creditors then it is known as Members voluntary liquidation. On the other hand, when the company’s assets are not enough to pay off debts then it is known as Insolvent voluntary liquidation.
In the case of insolvent liquidation, the directors have to meet a licensed insolvency practitioner, who is also known as a professional liquidator. This liquidator helps in arranging meetings with creditors and shareholders. This will help the company to choose an alternative way to pay off creditors.
The professional will also deal with all the legal formalities which are involved in business liquidation.