What Liquidation Means for a Business

By Clifford Woods

If your business is going to be liquidated, or you want to run your own liquidation business, then you will likely want to learn all you can about what takes place during this process. Basically, there are two ways a business can go into liquidation, under their own accord or involuntarily.

Throughout the liquidation process, the assets of the financially troubled business are sold and the proceeds are utilized to repay as many investors as possible. Even though the exact steps taken will change according to the type of liquidation, the event usually involves the sale of all the company's real estate and products, followed by the complete dissolution and closing of the organization.

Quite simply, whether the liquidation is voluntary or compulsory, the outcome will be the same. Creditors are compensated as much as possible and the company will no longer exist. Those who want to run their own liquidation business will get the best price for the products by contacting businesses that are liquidating and must get rid of their products.

In most cases, a business just simply needs to get rid of excess merchandise and will just need to liquidate a certain product line. In the consumer product liquidation business, go after retail-ready products only.

The Mandatory Liquidation of a Business: In a mandatory liquidation, an appointed individual creates a liquidation petition to the court to get the bankrupt company liquidated in an effort to recover funds to pay as much debt as possible. The petitioning person is often an Official Receiver, creditor, Secretary of State, or shareholder.

The directors of the financially troubled company may also be legally file a petition to close the company and 
pay off debts, though this is typically dealt with through a voluntary liquidation instead.

Following the compulsory liquidation, the procedure for selling the company's resources begins, and all lawsuits the company was involved with typically dissolves. Basically, any legal actions taken by investors or vendors are considered void after the liquidation has started.

The Voluntary Liquidation of a Business: The procedure for voluntary liquidation is normally less stressful since the whole procedure is thought-out and the company directors' gain access to the assistance and guidance of an insolvency specialist throughout the liquidation.

Provided that the necessary information can be confirmed to show the liquidation will offer the best outcome for the company's investors, then approaching a professional to liquidate the company is rather simple.

In the event that the bankruptcy specialist finds that the company's' directors are wanting to liquidate their company regardless of the fact that there are far better options available, they might refuse to agree to the consultation. In that case the insolvency practitioner would recommend better alternatives.

Why You Would Want to Liquidate Voluntarily: Whenever a company is involved with an excessive amount of debt, it might be time for them to accept that liquidation may be the only move to make. Postponing the procedure is only going to result in even more company debts, causing you to be held personally responsible.

Despite the fact that directors are not typically held liable for the debts of a minimal company, you are able to be charged significant fines and are ordered to pay certain debts if the court finds you guilty of wrongful buying and selling. This is a likely outcome if you continue to keep trading while insolvent without carrying out your responsibilities as a director.

By voluntarily employing an experienced insolvency specialist to go forward and handle the process, you can keep away from the majority of the hassles and headaches caused by being wound up and forced into a mandatory liquidation by investors.

If you are a liquidation business owner that buys and sells closeout products, businesses on the verge of liquidating will be more inclined to sell you their products are a very reasonable price.
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Clifford Woods is the owner of Rapid-Liquidations
We buy complete inventories of unwanted or discontinued consumer merchandise for cash and sell complete inventories of consumer merchandise at about 15 to 20% of retails prices!
If you are interested, we also have a complete, easy-to-follow manual on how to get started in this business yourself.

What is Voluntary Liquidation?

By Clifford Woods

Whenever a business dissolves, it is usually the consequence of compulsory liquidation processes. 

A creditor that has not been compensated for an order, and if the business continues to be unable to pay its debts completely, then the organization is liquidated, the assets sold off, and lenders paid for from the profits.


On the other hand, voluntary liquidation is another solution for many companies. With voluntary liquidation, it is the company that makes the decision to disband itself, and appoints a bankruptcy specialist as the liquidator.

The organization will stop its trade and the assets will be sold. When it comes to a retailer, it is vital that you sell off your stocks first. The proceeds can be used to pay off the expenses of the liquidation and then creditors; investors are left until last, and only get reimbursed if all creditors have been compensated first.

The Two Kinds of Voluntary Liquidation: There are two sorts of voluntary liquidation; creditors’ voluntary liquidation and members’ voluntary liquidation. A members’ voluntary liquidation takes place whenever there are plenty of assets to pay for all of the debts. The directors need to make a declaration of solvency for this kind of voluntary liquidation in order to be made use of.

A creditors’ voluntary liquidation, however, can only be done after a creditors’ conference is held. It is an extremely popular system for shutting down a business. The creditors might cast their vote by poll and can designate a liquidator or create a panel to keep track of the entire process.

What the Director Does: As soon as the liquidation process has started, the directors pass management of the business to the liquidator. They have to ensure that the liquidator knows how to recognize the assets and debts, as well as provide information on the company’s relationships and connections.

For example, they are going to have to show the liquidator just how the accounting system functions and might also have to produce title deeds for the building. Directors who would like to liquidate a company and want to continue in the exact same line of merchandise should remember that there are very tight rules about making use of the same company name.
‘Passing off’ is a criminal offense that indicates that the directors aim was to confuse customers or providers into thinking that they are working with the previous company.

It is occasionally possible to continue to work with the old name, however the liquidator must agree to this fact, and it might be required to gain a court judgment permitting it. Directors must also remember that any tax losses that have built up in the company are going to be lost when it comes to liquidation, whether it is a forced or voluntary liquidation.

The Advantages of Voluntary Liquidation: Liquidation is the final choice for the majority of businesses and is usually only considered after other available alternatives have been unsuccessful. 

On the other hand, it is certainly worth spending money on liquidation instead of simply stopping trade and ruining the company.

The choice to go into voluntary liquidation can protect the company directors from any allegations of wrongful investing, and guarantees that the company is correctly shut down; protecting it from any additional claims after the due process has been followed.

Voluntary liquidation is also a technique for dealing with shareholder conflicts. It may be useful as a method of dealing with the situation in a family business in which the children do not wish to take over the business and a sale of the business is not possible.
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Clifford Woods is the owner of Rapid-Liquidations
We buy complete inventories of unwanted or discontinued consumer merchandise for cash and sell complete inventories of consumer merchandise at about 15 to 20% of retails prices!
If you are interested, we also have a complete, easy-to-follow manual on how to get started in this business yourself.