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Why Do Businesses Liquidate?

November 15, 2019

Liquidation is essentially the winding up of a business – it is the process of selling off assets to distribute them based on whether or not the business is solvent or insolvent. The reason why a business might choose to liquidate their assets differ based on a myriad of factors. But generally, the liquidation of a company occurs due to insolvency. Insolvency is the point a business reaches when they are no longer able to make payments on a regular basis.


The Liquidation Process


The liquidation of a company entails the process of turning assets into cash to pay off any number of debts. Liquidation is a way for a business that has run out of funds to pay off debts. These debts range from business to business but depend on the investments into the business by banks or other creditors, or any loans that were taken out for business expansion. The process of liquidating effectively leads to the dissolving of a company, in which all business activity comes to a close.


Understanding Business Insolvency


In some cases, businesses may be forced to consider liquidation because they are no longer solvent. If the business manages to stay solvent, then the business’s director is still able to control business operations. If the business is deemed insolvent, directors have the option to place the business in the control of a reputable liquidator. The liquidator offers services that aid in turning assets into cash, paying off debts, and the overall winding up of a business.


The Liquidator’s Duty


The primary duty of the liquidator is to manage the entire liquidation process. Liquidators should effectively assess business assets based on market value, manage and plan for auction, and forward reclaimed cash from assets to the relevant creditor.


If you’re considering the liquidation of a company, and are in need of a reputable and experienced liquidator – consider the services of Infinity Asset Solutions. We offer decades of experience in servicing the needs of businesses of all sizes, across a broad range of industries. We’d be happy to assist you in the liquidation process!

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