Voluntary Liquidation Information

1. Voluntary Liquidation Information

2. Voluntary liquidation is a process that can be undertaken by shareholders of a company to pay off any outstanding debts that a corporation may hold. This is the opposed of involuntary liquidation, which is usually a result of filing Chapter 7 bankruptcy. Chapter 7 is where the court orders the sale of assets in order to pay off the debts of a company. The advantage of voluntary liquidation is that the directors and shareholders have control of the process and are willing to sell off the assets of the company. Involuntary liquidation does not have any external pressure from a court or other sources.

3. There are a few reasons that a company would chose to voluntarily liquidate their assets. A small business may choose to liquidate assets if the founder and owner of the company dies. Often times for a small business the owner is the backbone of the company and without him the business may not survive. Often times shareholders will chose to liquidate all assets and close the company. Once all the assets have been sold the shareholders will pay off any debts that were held by the company and divide the remaining money amongst themselves.

4. Another possibility is that a company sells off their assets in order to continue operating. This has become a common thing to do, especially during the current economic conditions. Larger corporations may choose to liquidate smaller subsidiary companies to settle their debts. Any remaining money can be used to cover debts of the parent company. Often times selling assets can give a company a much needed cash flow to continue operating.

5. Voluntary liquidators can also result in an increased value for shareholders. It is important to look at a companies' balance sheet before beginning to liquidate assets for this reason. If the level of cash that coulee potentially be generated from selling assets is greater than the market value of the company minus their liabilities then a voluntary liquidation could increase the value for shareholders. This should only be attempted if there is a significant margin between the money generated and the market value minus assets.

6. Depending on the size of the company the process for voluntary liquidation can vary. Many times a payment schedule is created as well as a list of assets to be sold. After the plan is approved by shareholders, the company can begin to sell their assets. Typically the process takes anywhere from six to twelve monist. Voluntary liquidation is a great way for a company to survive a difficult period without pressure from a court or other entities.