We see several headlines of assets being liquidated at the time of the financial crisis. But what does asset liquidation mean?
If there is a business which is going through tough times with the sales and financial flow, there are several ways they can deal with such situations. One way is to liquidate the company’s assets and sell it to pay all the necessary bills.
Hence, the process of selling the assets and converting them into cash is called “Liquidating.”
When a business is considered insolvent, it is unable to pay its debt and is obliged to act legally in the creditors’ best interest. However, if there are no debts, but the business has no future, the director or the owner of the company should seek advice from an insolvency practitioner.
Insolvency practitioners are experts in estimating the value of the company and can help you sell your assets to raise the money to compensate creditors and the shareholders.
When such a scenario happens, the best way to deal with it is to sell the business and liquidate assets. The assets may include everything present in the company: office plants, furniture, vehicles, fixtures, and fitting.
There are several methods that are practiced by the insolvency practitioner to liquidate the assets. This method might vary depending on the type of assets and company’s nature.
If there is no deadline for the asset liquidation, then the assets can be sold at higher prices in the open market. However, if you need urgent money, you can put all your assets on sale at auctions.
No matter what method you use to sell all your assets, it will be professionally handled and valued so that the creditor gets the best return.
An insolvency company can owe money to several companies or organizations. This may include people and organizations at every level of business. Once the assets are sold, the money is then distributed to the respective creditors in the following order.
- Creditors investing money with a Fixed Charge.
- Creditors with preferences.
- Creditors investing money with a Floating Charge.
- Creditors who are insecure with their investment.
Once the whole liquidation process is complete, the detailed report is sent to the creditors. The report consists of detailed information related to the assets, Starting from the assets’ market price to the selling price. It also shows how much the creditors will get in return.
Assets Liquidation is different compared to the Member Voluntary Liquidation (MVL). No matter how much debt the business is, the business itself is not solvent. You can see this the whole process as if the owner or the director of the business no longer want to continue with the business, or wish to retire. In that case, asset liquidation takes place.
Though MVL and Asset Liquidation are different, the process is the same. An insolvency practitioner is appointed to look after the whole process. If any creditors need to be repaid first, they will be the first to get the money after the asset’s selling. And the rest is distributed, making the shareholders.
The liquidation process consists of several layers of legal work. No matter how efficient you are with work, you will find yourself in a position where you will need help. If that scenario ever happens, try to look for the best insolvency practitioner in your area. You can even get in touch with us. We will be more than happy to lend a helpful hand.