When a company dissolves all of its assets in order to pay off outstanding debts, which then results in it being closed down, it is called voluntary liquidation. There are various reasons as to why a business would opt for voluntary liquidation.
Resignation or Death
If an important member of a business resigns or passes away, shareholders often won’t want to continue with the business. In these cases, businesses decide to sell the company’s assets rather than replacing the lost member of the business.
Need for funds
Many companies opt for voluntary liquidation in order to obtain funds for the company’s use. This is common with large businesses who sell off assets to subsidiaries.
Pay off creditors
Businesses who are facing a major financial crisis often decide to choose voluntary liquidation. When businesses have major debts and can’t pay off their creditors, they opt for voluntary liquidation, which is a better option than going bankrupt.
The first step of this process is to pass a resolution, stating that the business wants to go into voluntary liquidation. Once this resolution is passed and approved, the business ceases all operations.
If you own a business and face any of the above problems, then you should definitely opt for voluntary liquidation. Voluntary liquidation can help you to close down your business whilst still allowing you to keep some money.