Liquidation is a procedure in which the assets of a business are turned into cash, and helps the company or debtors to pay off their debts to creditors. Nowadays, many companies who do not have money to pay debts opt for voluntary liquidation.
Voluntary liquidation is decided by the shareholders or partners of the company to pay their creditors. This process is completely different from compulsory liquidation, as there is no order or pressure from the court.
Why businesses undergo voluntary liquidation
There are various reasons for voluntary liquidation. In the case of small businesses, if the founder or the owner dies then the partners often opt for liquidation and discontinue operations. In these cases, all the assets of the company are properly sold and then the cash is distributed amongst the creditors. After the payment is completed, the remaining cash is often distributed between the partners.
The structure of voluntary liquidation changes on the basis of the complexity and size of the company. In addition to this, the process of liquidation can change according to the urgency. Generally, the whole process of liquidation is handled by a professional company, who determine which assets need to be sold.
The timescale for voluntary liquidation varies from business to business, and can take weeks or months.