Jason Elliott, at The Insolvency Experts, briefly explains the rules for businesses who are in the process of in liquidation but wish to continue trading.
The simple answer to the question ‘Can a company continue to trade when in liquidation?’ is ‘no’ although there are exceptions in a limited number of instances. Directors should cease trading as soon as the decision to liquidate the company has been made, and failure to do so could land the directors personally liable for the debts of the company.
The primary objective of a liquidation is to close down the business and cease trading completely. The liquidation process will be handled by an Insolvency Practitioner, and in most cases, companies will not be given the opportunity to continue trading once the liquidation process has commenced and they are officially in liquidation.
We also offer more detailed advice on a range of matters related to companies in liquidation over on our main company liquidation page.
Trading whilst in liquidation exceptions
If there are works to complete which would increase the return for creditors on the liquidation of the company, the Insolvency Practitioner can agree for the work to be completed. Equally, if it could assist debt collection, some companies in liquidation may be permitted to continue trading in the short term. Directors, of course, should be highly cautionary in such situations.
Even if the business is allowed to continue trading for a short period of time, directors should be extremely careful to make sure no further credit is taken and no additional debts are accrued. Any decision in this period of being in liquidation should only be made with the full consultation of your Insolvency Professional.
More advice for companies in liquidation
Whether you’re asking initial questions such as ‘what is liquidation of a company’ or you’re in charge of a company or companies in liquidation, you’re welcome to get in touch with our expert team today.
Should you require specific advice as to whether your business is permitted to continue to trade whilst in liquidation, contact our Insolvency expert team on 0300 303 8284 or fill out an enquiry over on our Contact page. We can advise on a variety of situations related to being a business in liquidation.