Effect of Liquidation on a Company - Klaus Garde Nielsen

The Liquidation is also known as “Winding Up” in this process by which the company’s assets are liquidated and the company is closed or deregistered. It is the process in which the company is brought to an end and the assets and the property of the company are redistributed. The process of liquidation is also arises when the customs and authority or agency in the country responsible for collecting and safeguarding the some customs duties and determine the last computation or ascertainment of the duties or drawback accruing or an entry.

The term liquidation is only used when a company wants to divest it or a few of its assets. This is mainly used in instance when the retail establishment wants to close the store. They force sell to a company and that concentrate in the store liquidation in its place of attempting to a run a store closure and sale them themselves.

Mainly, liquidation is a legal process to through which a company or business is brought to an end. All the assets are sold off and proceeds are used to pay its creditors when the businesses are liquidated. It’s also known as dissolutions of the business.

Generally the people say that the liquidation is an alternative for the business which is incapable to pay their debts. As the result, the creditors take the control of the assets of the company and sell them off to get back the highest amount that they can use. The creditors get the first priority to whatever is sold off but the second priority in the line to given to the shareholder who get whatever is left with the preferred priority having preference over the general shareholders.

There are mainly two types of the liquidation: one is Compulsory and the second is Voluntary.

When the court orders a business to liquidate its assets and pay off its creditors it’s also called compulsory liquidation. While in voluntary liquidation when a company itself the creditors or the contributors can put the petition in a court foe a liquidation. This can only happen if the company is unable to pay its debts or it’s equitable to windup the company. Generally, voluntary liquidation is also supported by the shareholders of the company who decide to wind up the company and dissolve it.

Generally, the huge the majority of the application for the required for winding-up are made as per on e of the last two grounds. It’s very clear that the order will not be made of the real purpose of the application is the other then for a winding up such as: the application is made is just to enforce a debt.

While it comes to voluntary liquidation, if the company is solvent and the members have through a statutory declaration of solvency, the liquidation will advance as the voluntary is winding up.

Klaus Garde Nielsen is business men which are providing the various consultancy services. He is CEO OF KGN Consult.

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