When a company comes to an end, they have to go through the legal process of liquidation. During the process of business liquidation, companies sell off their assets to pay off their creditors. Business liquidation is also called winding up or dissolution of business. When a business is unable to pay off their debts, they often opt for liquidation.
If you own a company that has major debts, then liquidation could be a great option for you. During this process, creditors take complete charge of the assets of the company, in order to sell them.
Liquidation is generally falls into one of two kinds- compulsory or voluntary.
Compulsory liquidation generally takes place when a court orders a business to liquidate all of its assets to pay of creditors. Voluntary liquidation is when a company decides to dissolve a business on its own.
During the process of liquidation, a detailed account of all the assets that a business owns is taken. They are then categorised into different types before being auctioned, where assets are sold to the highest bidders. It is easier to sell liquid assets as opposed to non liquid ones.
The process of liquidation is the final step that a business has to undergo, so it should be carried out with extreme care. If there is little chance of you clearing your debts, then business liquidation is the best option.