Many people associate the term liquidation with debt. The fault with people’s thinking is that they do not think beyond certain areas and invariably end up associating liquidating a business with financial uncertainty and thus business termination and failure.
Liquidating a business can also be a part of the original business plan
Very often, businessmen and their partners introduce flanker brands for their products. Termination of a small scale business unit in such a case can also call for liquidation in order to get the best value for the assets for that business unit.
In fact, liquidating a business may come about as a result of a number of factors including:
- The company’s decision if it decides to dissociate its constituents. It may choose liquidation as an exit policy.
- If the company or business in question has been included as a public company and has not been issued a trading certificate in the given time frame
- It could be an old public company and as a result has not re-registered itself under the new regulations requiring companies to do so.
- It is equitable for all the partners involved in the business and thus there is no other option except liquidating a business and its assets.
In a broader context, liquidation can also mean the freeing of revenue in order to meet immediate needs. This may be done by selling off or mortgaging products or assets that belong to the business.