The process of taking a business’s real assets and converting them into cash for paying debt off or to reap a personal profit is called liquidation. Perhaps liquidation is done either voluntarily by a company or individual, or in a response to a declaration of bankruptcy as a way of repaying a portion of debtors.

A court can order compulsory liquidation, and the laws vary in different countries. When court orders then court-appointed receiver analyzes the company’s assets and determines the best way to handle them. The amounts which court recovers from liquidation distributes evenly amongst the debtors. It’s up to debtors then to take precedence over others, depending on the terms of the loans.

While for voluntary liquidation there can be several reasons. If companies believe that their business will continue to degrade, they elect to undergo liquidation while their assets still outweigh their liabilities. These companies can be able to pay off debtors and still give final dividend to shareholders by selling off their assets early.

A corporation with more liabilities than assets can also undergo voluntary liquidation, because they think that compulsory liquidation will not be able to pay off a significant portion of their debt. Such type of liquidation is considered a proper response to an insolvent situation.

A recently acquired corporation can also undergo voluntary liquidation so that the investment groups can realize the immediate profits and pay off their high-interest bonds. This is an incredibly hostile technique and often referred to as asset stripping.

Liquidation costs usually are taken out directly from the company’s assets. It include advertising for the sale of the assets, insurance for covering the sale, direct fee to the liquidator, and costs for disbursing assets to purchasers.

There are number of large liquidators around the world that handle the liquidations, also secondary liquidators that are specialized in buying out large amounts of equipment from top-tier liquidators, who resell them on a consumer level. Secondary liquidators usually operate on the internet either through auction or set prices far below market value.

Sometimes liquidations are great source of new equipment and materials for new companies or the companies that are looking to expand their business. The cost of equipment in a liquidation auction can be so low than the price of the same equipment purchased through a mainstream distributor or auction.

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