Business Advice

Types of Business Liquidation

When a business is not able to meet its credit obligations, the liquidation company can use two types of business liquidation. The first type of liquidation is the creditors’ voluntary liquidation. The owners or shareholders of the business usually initiate this. These people make sure that they get someone from the liquidation company to meet with the business’ creditors to inform them that the company is insolvent. When the creditors approve the liquidation, the liquidation company’s main duty is to sell off the business’ assets and pay the creditors. The business is then closed.

The other way in which a liquidation company can liquidate a business is through a compulsory liquidation, the business creditors initiate this. The creditors get someone to present a petition in court asking the courts to liquidate the business. The business owners also receive a copy of the petition. If the business still does not pay the creditor, the court hears the case and the judge passes the order that the business should compulsorily liquidate. The liquidation company then sells off the business assets and distributes the proceeds to the creditors.