Liquidation and Dissolution
The economy has made an impact on employees lost jobs, and companies who have to liquidate assets into cash due because they do not have enough profit or revenue in a company. Some company’s can survive in this tough economy but some companies may face liquidation or dissolution. The proceeds from the liquidation will help pay its outstanding obligations set forth by the court before the company goes out of business.
If a company decides to liquidate its assets, the company should be aware of the different liquidation types that are chosen for the company. One type of liquidation is voluntary. If a company chose voluntary, the shareholder starts the liquidation proceedings. The second type of liquidation is compulsory. Compulsory occurs when the court start the liquidation proceeding. Before a company decides to liquidate its assets it is important to know the different types of liquidation and the best one for the type of company. If the court liquidation occurs, the applicant has to prove that the company can be insolvent. Insolvent occurs when a company cannot pay its debts when due. The court has to appoint a liquidator for the applicant as well as resolve disputes between shareholders or directors (Worrells, 2010). The liquidator represents the interests of all parties involved in the process. If a company chose a voluntary liquidation, the company can choose the liquidator. The creditors also have choice if they want to keep or change the liquidator. This liquidation process can begin with the meeting of members, known as Voluntary Winding Up provisions, or at a meeting of creditors, known as Voluntary Administration provisions of the Corporations Act (Worrells, 2010). Part of the liquidator responsibilities are:
1) finding and protecting assets of the company
2) distribute available assets to the credits
3) distribute available surplus to shareholders
4) realize and recover assets (Worrells, 2010)