How to Liquidate a Business?
Licensed UK Insolvency Practitioners the UK’s No.1 for Business Recovery
The Insolvency Experts have a wealth of knowledge and experience in relation to liquidation, whether it be solvent or insolvent liquidation. We understand the best ways to liquidate a business, and we hope that this guide sets this out clearly, providing guidance to company directors when their business looks to be heading into liquidation.
Liquidation is the option your company faces if you have cash flow problems on a regular basis and creditors are threatening to take enforcement action against the company and there is no prospect of selling the business or part of the business. In this instance, you could face either Compulsory Liquidation or Creditors’ Voluntary Liquidation.
By quickly taking back control we can help you solve the problems that the business has.
Four Key Questions on How to Liquidate a Business
What Should I Know on How to Liquidate a Business?
The process of business liquidation is primarily geared around the realisation of company assets, but depending on the specific situation the processes can vary slightly.
- Creditors’ Voluntary Liquidation – This process take place when a company is insolvent and no longer has the ability to pay liabilities or to continue trading. Once the directors of the company have instructed an insolvency practitioner they commence a decision-making process to place the company into liquidation and appoint a liquidator.
- Member’s Voluntary Liquidation – This process takes place when a company is still solvent and able to trade, yet the directors of the company wish to close the company down. This ensures that the process can be achieved professionally and in an orderly manner wherever possible. This could be due to the retirement of a director or shareholder, or when a family business has no one to succeed.
- Compulsory Liquidation – This process involves the courts and happens when a winding up petition has been issued by a creditor of an insolvent company, as a due debt has not been satisfied. The petition is subsequently heard at a winding-up hearing and a judge can make a Winding Up Order to place the company into Compulsory Liquidation.
Are there Benefits to Business Liquidation?
The best way to liquidate a business is to have as much control over the situation as you can. By choosing to liquidate your company, you can benefit as a director. It prevents the creditor of the company from incurring more debt and also ensures that you, as a director, are less likely to be guilty of wrongful trading action being brought against you.This is process of business liquidationalso ensures that:
- Employees can submit claims for redundancy pay through government avenues in an orderly fashion
- Removes pressure from all creditors
- Prevents further legal action being taken against you
- Allows time for realisation of company assets, ensuring that creditors receive the best possible return in terms of repayment of debt owed.
- Allows time for directors and/or shareholders to purchase assets at fair value, if they can be used in another business going forward
- Offers a complete, clean break for directors to move on from the company
- As liquidator’s costs are paid once company assets are realised (providing there are assets of a sufficient value), then there are no other fees that directors are liable for.
What Role Does the Liquidator Take?
During the insolvency process and the business liquidation, a licensed insolvency practitioner (IP) must be appointed in order to perform all the legal obligations and requirements in a proper fashion.
The insolvency practitioner is expected to conduct the process of realising the assets at a fair value for the benefit of creditors,with the company assets to be distributed fairly to creditors, following a strict hierarchy of payment stages, until these funds have been utilised. The insolvency practitioner is also responsible for making staff redundant and assisting with employee claims, as well as investigating the conduct of company directors.
What is the Best Way to Liquidate a Business?
When you first appoint an Insolvency Practitioner, they will consider all open options to the company, including a Company Voluntary Arrangement, the refinancing of the company, or even Administration. It is the responsibility of the insolvency practitioner to ensure the best possible result for creditors under the circumstances.
- Thorough Investigation – It is important that all information is collected and collated promptly, and in a thorough manner. This includes all company books and records, details of company assets, cash and book debts and all non-physical assets such as databases, websites and digital marketing literature.
- Full List of Creditors – The directors must provide a list of creditors, with information on precise money owed, names, addresses, and reference numbers. The debt listed must also include contingent debts linked to guarantees and warranties.
- Inform Creditors – The insolvency practitioner will then go through the process of informing every creditor listed of the company position. This will be through a formal notice. Although there is no longer a legal requirement for a physical meeting to take place with creditors, a decision-making process or deemed consent process must still take place to appoint a liquidator.
It is a stressful, and often complex, time to consider your company going into liquidation. That is why it is always prudent to seek professional advice from insolvency experts. The Insolvency Experts is a team of experienced insolvency professionals, with a wealth of knowledge in business liquidation and all the processes linked to it.
Over the years we have assisted countless companies at a time when they need help the most. We can help you work out how to collect, collate and process important information for your employees and creditors, put in place an insolvency practitioner to realise assets and set the process on a firm footing. You can reach us by phone or email today to speak to our team and find out more information.
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