Notes on the process of Liquidation and dissolution of a company: Once a corporation goes out of the business needs, there is a set of lawful procedures which it goes through. These include liquidation of resources and the supplying of the incomes to owners and creditors. The whole procedure is termed as dissolution.
What is Liquidation?
Liquidation of a company is when it is resources are sold or taken over. When a company undergoes liquidation it does not imply it is terminated. It implies that the company will require financial assistance to come back to life. Some companies pick up after liquidation but most of collapse. Liquidation can be involuntary or voluntary.
Liquidation of a company also refers to selling of its assets completely. Most of the time, this remains the only choice for a company when there is no other choice and the business closure is impending, for instance acquiring an emergency capital. Liquidation sales occur in different set-ups, comprising of consignment sales and negotiated buyouts.
The resources that normally necessitate liquidation are equipment, inventory record, raw materials, constructions and plants. Because the main aim of selling out a business is often the failure or incapability to cover costs, then companies may decide not to waste their entire resources and time getting the full worth of their resources and then end up liquidating them at a noteworthy discount.
What is Dissolution?
Dissolution is the termination of a company, often on voluntary standings of the business holder. It necessitates the payment of pending money and shutting down of each tax account. The articles of merger, which are drafted when the company is formed, should show in detail the procedure in the incident of business dissolution. It is crucial to close all tax financial records, as the corporation is going to be accountable for tax fillings, even though operations have stopped.
As soon as a company completes the dissolution procedure, it is no more a lawful unit.
Corporation can be dissolved willingly by its possessors or unwillingly by the secretary of nation or state for not paying taxes or the creditors can request a court to force it into closure.
In the occurrence dissolution, three stages are followed.
- The first is to understanding the basis of dissolution,
- second is liquidation
- finally division of assets or resources.
In conclusion, business liquidations and dissolution are critical stages representing the culmination of a company. Both liquidation and dissolution pursues different mechanisms of bringing a business to an end.