What Does “Liquidation” of a Company Mean?
Basically, liquidation is a legal process through which a company or a business is brought to an end. All assets are sold off and proceeds are used to pay its creditors when a business is liquidated. Liquidation is also known as winding up or dissolution of business. Normally people say that liquidation is an alternative for businesses, which are unable to pay their debts. As a result, the creditors take control of the assets of the company, and sell them off to get back the maximum amount that they can. Creditors get the first priority to whatever is sold off. Second priority in the line is given to the shareholders, who get whatever is left, with the preferred shareholders, having preference over common shareholders. There are two main two types of liquidation; one is compulsory and the other one is voluntary. When a court orders a business to liquidate its assets and pay off its creditors, it is compulsory liquidation. While in voluntary liquidation, a company itself, the creditors,
