Have you ever wondered what is the liquidation of a company is? Many people don’t know what goes through behind the liquidations of a company. If you want to learn more about liquidation companies, we’ll discuss it further.
What is the liquidation of a company? Liquidation, commonly known as insolvent liquidation, is when a company cannot pay its debts on time. To pay for the debt, the company’s assets are sold to pay for its creditors, claimants, and shareholders, and the company is dissolved as a result.
To cease trading of the company, a meeting is held between the board of directors, creditors, and shareholders. In this meeting, the directors report the company, its trajectory, where it stands, and why it can’t continue its operation.
At the meeting, there will also be a statement of affairs that explains the company’s assets and what they’re likely to realize, what amounts of the creditors are and what they might expect as dividends. Once the shareholders have reviewed all the statements, they will soon ratify the resolution to put the company into liquidation and nominate a liquidator. In the meeting, creditors can either choose to continue with that nominated liquidator or choose another liquidator if they have sufficient value.
In liquidation companies, the liquidator is tasked to realize the company’s assets to the best price, and those assets are distributed out to the people that are owed money.