How Liquidation Works

liquidation worksSometimes, businesses do liquidation due to bankruptcy. This is a problem if it happens to be one of your customers who owe you money. You may wonder how to get your money back. You may wonder if you can get the payment from the company’s liquidator or is there any money left to make the payment in the first place.

For those who still don’t know, liquidation is a way for the business to wind up where its assets are sold for a cheap price so they will be converted into cash. After this, the company is deregistered or closed. A company becomes insolvent if is no longer capable of paying its debt. Its financial state will also determine the kind of liquidation that will be done as well as the investigation types which the liquidator has to do.

Now what happens to the solvent insolvent company, you may ask. The court may wound it up or the creditor may also voluntary wind up, otherwise known as “voluntary winding up”. The one who will decide whom to appoint as a liquidator are the members of the company. However, the final say still has to come from the creditors whether to involve a liquidator in the company.

Now, don’t fret up since your will only be affected if the liquidation was done because of insolvency. However, if a voluntary winding up was made, all of the company’s debts will be paid and that includes their debt to you. For insolvent company, the case will not be the same most of the time.

What then will be the liquidator’s role in the process? For an insolvent liquidation, the liquidator will deal with and collect the company’s assets. They will also be the one who will distribute the company’s assets to the creditors and members. It is also the duty of the liquidator to investigate the reasons why the company failed as well as its directors’ conduct. Their investigation may also include third parties such as the creditors.

Once a liquidator was appointed, notice will be set by this person to the creditors. This will include the proof of debt documents as well as proxy forms for voting.

If funds are available, the liquidator will check the proof of debts to determine how much the company owes. He will then decide if the claim is valid and if payment has to be made.

Since products are sold at cheapo prices, leading wholesale liquidators are often sought for by retailers and consumers alike. Hence, if you want to expand your profit, look for wholesale liquidators today.