There are a number of exciting prospects that come with running your own business; however, there are also many potential pitfalls that come with it as well. There are several reasons why your organisation might fall on hard times but if this is ever to happen then it may well be the case that you need to enter into liquidation. Doing this can be a bit more complicated than you think as not only do you need to make the difficult decision to go into liquidation, but you also need to find the right practitioners who can act in your company’s best interest. At Simple Liquidation, we pride ourselves on being able to offer businesses the best services possible and help them through what can otherwise be a stressful period.
What is Liquidation and When is it Necessary?
To put it plainly, liquidation is the name of the process involved in formally bringing a company to an end. Once this procedure is finished, the company will officially be considered closed and all of the assets of the company will be allocated to the necessary parties. Assets will be distributed differently depending on whether the business in question is solvent or insolvent.
If a company gets to the point that it doesn’t think it needs to continue trading for whatever reason then this is when liquidation usually occurs. A common reason is that the business has fallen on hard times and is no longer in a position where it can continue trading. Another reason could be that the directors of the company have had enough and decided they would like to retire.
Liquidating Due to Insolvency
As stated above, one of the main reasons that a lot of businesses go into liquidation is because they are insolvent. Insolvency is when a business reaches a point where it is no longer able to make any of the payments that it has due. This leads to an increased amount of creditors knocking at a business’s door looking for outstanding payments. When a company goes into liquidation, its different assets will be turned into cash and as this happens, that cash can be made to pay creditors who have money outstanding.
If your business is no longer making any profit and has gone insolvent then you will need to appoint a liquidator to oversee the winding up of your business. Other remaining assets need to be sold off and paid to the creditors if the company ends up being insolvent. Finally, once everyone has been paid, if there is anything left over then residual funds will be dispersed to shareholders.
Different Kinds of Liquidation
Liquidation is not a straightforward process and there isn’t simply one form of liquidation available either. There are three different circumstances under which liquidation can be brought forward for businesses. Two procedures are voluntary and then one of them is compulsory.
- Members Voluntary Liquidation
If you have a business which is solvent then a Member’s Voluntary Liquidation is the right way to go as it can be used as an effective exit strategy. Going down the route of solvent liquidation can be an excellent way to save money on the likes of Capital Gains Tax. In order to instigate this process, the directors of the business need to sign a declaration which confirms that there aren’t any remaining creditors awaiting money.
- Creditors Voluntary Liquidation
Insolvent companies tend to use Creditors’ Voluntary Liquidation, a process which is initiated by a shareholder resolution. This technique can be beneficial as it allows directors to write off unsecured and non-personally guaranteed firm obligations. This is the most common form of liquidation in the UK with around 10,000 happening every year as directors view it as a means of settling financial difficulties whilst seeing to all creditors. The company’s directors will be responsible for requesting a liquidator call a meeting of the company which will provide a statement of affairs that summarises the current situation of the business. Once a liquidator has been appointed the directors of the company no longer have control over it, they do need to cooperate with their liquidators though.
- Compulsory Liquidation
Compulsory liquidation takes effect when the creditors have run out of options to collect the debt of the business. In order for compulsory liquidation to take effect, the debt owed has to come to more than £750 and cannot be disputed. The creditor also needs to notify the debtor that they intend on starting compulsory liquidation. If a judge issues a winding-up order with a business then the official receiver will need to interview the director and in turn, liquidate what assets the company has to begin to compensate the creditors.
What Should You Look for in a Liquidator?
Despite the above three processes having differences, each one requires a liquidator. As such, you need to make sure you are choosing the right organisation to represent your business when you go into liquidation in order to maximise your returns. One of the best companies out there is Simple Liquidation as we can offer your business some of the most important characteristics you would expect from a practitioner. These include:
- Good Value for Money
Liquidation work is highly regulated and as such, the majority of companies go for Court Approved hourly rates. Simple Liquidation will be able to offer our services for a reasonable rate which is in line with these hourly rates. As such, you can rest easy knowing you are getting good value for money.
- High-Quality Experience
Liquidating a business can be difficult and as such, you are going to want to appoint a liquidator with plenty of experience who is going to be able to act in the interests of both you and your creditors. This comes with good experience and as such, is something you should look out for with a liquidator.
If you have any questions or require any further information about what Simple Liquidation can offer your business then do not hesitate to get in touch.