Corporate Asset Liquidation in the Philippines
Many corporations and enterprises that are about to shut down typically undergo liquidation, a process where companies sell their inventory and/or assets to generate funds so they can pay off their obligations. But contrary to what many people think, this process is not exclusive for companies nearing bankruptcy. Some companies that are not financially struggling may still choose to liquidate their assets as part of their strategy.
In this article, we will learn about corporate asset liquidation and how it works here in the Philippines.
What is corporate asset liquidation?
Corporate asset liquidation, as the name suggests, is simply the liquidation of a corporation’s assets. For the purposes of this article, only assets with a physical form will be considered as corporate assets.
Corporate assets include all the objects and equipment owned by a corporation that has economic value, whether at the present time or in the future. These may include:
- Desktop and laptop computers used by their employees in their offices
- Tablets and mobile phones given to their staff
- TVs and monitors placed inside their office building
- Office furniture such as desks, office chairs, lighting fixtures, storage cabinets
- Machinery such as food processing and packaging equipment
- Tech equipment such as point of sale systems, WiFi routers, printers, scanners, copiers
- High-value artworks and decors in the office building
- Company vehicles
Benefits of corporate asset liquidation
Liquidating your corporate assets can benefit your company in many ways, including:
- Freeing tied-up capital in assets that are not generating enough income or profit for your business
- Increasing your business’ liquidity
- Improving your cash flow
- Clearing your office or warehouse space so you can make room for assets that generate higher income for your business
- Lowering your risk for asset damage
- Lowering your risk for theft
What is the process of liquidating a business?
Liquidating a business, specifically an insolvent business, here in the Philippines typically begins with a court announcing the bankruptcy of a company. This will allow the creditors and/or shareholders of the company to start filing their claims for payment of the outstanding debts owed by the bankrupt business.
Next, the company will assess its assets and determine their value. This may be done internally or with the help of a professional liquidation company.
These assets will then be sold and the earnings will be used to settle the debts and liabilities of the bankrupt company before it is officially shut down.
How does corporate asset liquidation work?
Corporate asset liquidation works differently for different companies, depending on their type.
Solvent businesses — businesses with more assets than liabilities — that choose to liquidate some of their corporate assets will still continue existing as a legal business entity after their corporate assets have been sold. In this case, their decision to undergo the liquidation process is voluntary; it may be a way for them to improve their liquidity so they can continue operating profitably. Their earnings from the sale of their corporate assets may be allocated for more investments in equipment, their people, products, or other assets.
But for insolvent businesses — businesses with more liabilities than assets — the decision to undergo the corporate asset liquidation process is not necessarily voluntary. In many cases, it is a last resort and one of the remaining ways for bankrupt companies to raise funds so they can pay off their debts and avoid facing legal charges brought upon by their creditors. In this case, corporate asset liquidation becomes part of their exit strategy and signals the end of the company’s existence as a business entity. Unlike solvent businesses that have flexibility on how they will spend the earnings from their sold corporate assets, insolvent businesses must use all of their earnings for one purpose only: as payment for their obligations. Once all their debts have been settled, the business is shut down.
Corporate assets that can be liquidated
There are many types of corporate assets that can be liquidated. It is best to consult with your chosen liquidation partner for the list of assets they can accept as this may vary from liquidator to liquidator.
For your reference, the following assets are generally accepted by liquidation companies:
- Unsold inventory (note that this may depend on the products you offer; perishables like food, beverages and medicines may not be accepted)
- Raw materials
- Used office equipment such as company computers, keyboards, monitors, printers, laptops, tablets, mobile phones
- Other high-value electronic items such as televisions, speakers, sound systems, point of sale systems
- Office furniture
- Office decor such as paintings and sculptures
- Company vehicles
How to dispose used office equipment
You have many options for disposing of your used office equipment. Depending on their condition, you may choose to:
- Sell them with the help of a liquidation or buy and sell company. Choose a company that specializes in liquidating or selling used office equipment so you can have a higher chance of selling them for a competitive price.
- Return them to the manufacturer. Some manufacturing companies accept used products from their customers for the purpose of recycling some of its parts.
- Sell them to a recycling company. Similarly, you may look for a recycling company that can safely handle and recycle the parts of your used office equipment.
- Donate them to another company or school. Give back to your community and simply give your used equipment away to another company or educational institution that needs them but can’t afford to buy one.
Used company computers liquidation
If your business is looking to upgrade its computer equipment, consider liquidating your used company computers first. Not only will this help you boost your cash flow but it will also give you an opportunity to recover a portion of the money you spent to buy these high-value equipment in the first place. This will help you maximize your investment on these assets and potentially increase your budget for your new company computers.
Corporate asset recovery
Some corporations have initiated their own asset recovery programs and efforts to maximize and recover the value of their assets, such as computers, mobile phones, vehicles, and other functional items that have never been used or are nearing the end of their life cycle.
There are many ways companies can implement their asset recovery programs, such as by:
- Organizing an employee purchase program. This gives employees an opportunity to buy these assets easily through flexible payment terms (e.g., salary deduction or installments)
- Selling. Companies can sell these assets within their network or publicly.
- Reusing. This is suited for assets that haven’t been heavily used.
- Recycling. There are companies that specialize in end-of-life product management; entrusting your outdated or slightly damaged assets to them will ensure their parts and components will be recycled responsibly.
Disposal of outdated office equipment
Disposing of your outdated office equipment has benefits for your business apart from revenue recovery.
While selling or liquidating your outdated office equipment will give your company that extra financial boost, there are other benefits you can gain from strategically disposing of your old equipment.
For example, you can recover the space that your outmoded equipment is occupying and use that space for new and more advanced equipment that could help improve your company’s processes, efficiency, and quality of products and services.
Office equipment liquidation
Bought too much office equipment, only to realize that your office doesn’t have enough space to hold them all? Or are you planning an overhaul or upgrade of your existing company equipment?
You may want to look for a company that provides office equipment liquidation services. This can help you recoup your investment from your current office equipment and ensure your company’s good financial health.