Liquidation Process

FAQ

How to Liquidate a Company? Frequently Asked Questions

You may be wondering exactly how to liquidate a company and need some answers.  While there are general terms and conditions required to liquidating a business, specifics differ depending on the type of liquidation. The main purpose for liquidating is to have the company’s assets and properties appraised and sold, and the money from the sale redistributed to creditors.  If any surplus funds remain, they are given back to the shareholders.  The final step of the winding-up is the dissolution of the business.   

FAQ on How to Liquidate a Company

One of the first questions frequently asked in how to liquidate a company is, “Where do I start?” The answer to that question depends on whether you are the company, or if you are one of the creditors of the company that is waiting to get paid and wants to take action. Keep in mind that the term “liquidation” is also used in situations where a company is looking to sell off surplus goods or equipment.

  • For an insolvent company that wants to voluntarily place itself into liquidation (before creditors take the step), a special resolution must be passed by the majority of shareholders, and generally the business ceases to operate.  This is called a creditors’ voluntary liquidation and requires a meeting of the creditors to be held to update them on the financial condition of the company.  A liquidator is appointed and a liquidation committee is formed. 
  • A solvent company may choose to place itself into the type of liquidation know as a members’ voluntary liquidation.  The company appoints a liquidator and proceeds much the same way as a creditors’ voluntary liquidation.  
  • Compulsory liquidation is a forced court ordered process that generally occurs as a result of creditors filing a petition with the courts as a means to get paid some of the money that is owed to them.  In many cases, the sale of the insolvent company’s assets does not bring in as much money as the amount of debt owed.  The liquidator is responsible for determining how the money will be distributed to the creditors.

For the most part, the process of liquidation necessitates:

  • Appointing an authorized liquidator by the shareholders or in the case of a compulsory liquidation, by the court
  • Assets and properties inventoried, appraised, and then marketed for sale 
  • The liquidator is responsible for the integrity of the process and sees to it that all proceeds from the sale of assets are distributed correctly to creditors, and then any remaining funds to shareholders
  • The final step is to officially close the business

Rabin is an international company that specializes in creating liquidity for complex manufacturing facilities with idle or marginally productive assets.  Rabin’s operations include selling entire plants, multiple plant locations, or surplus individual items by auction or liquidation and much more. Past auctions include names such as Hostess, Braniff Airlines, Montgomery Ward, and the Railway Express Agency.  Please contact us to discover the ways we will use our expertise to help you through the process of how to liquidate a company.