There are a number of different reasons why a company may need to go into liquidation. Sometimes this is because of circumstances that are within a business’s control, whereas on the other hand, a lot of the time it may well be the case that circumstances completely out of a business’s control have led to their closure. Regardless of the reasons, the liquidation process is very important, and businesses need to make sure that they work with liquidators who they can trust and who offer transparency.
What is Liquidation and Why Is Transparency Important?
Liquidation is the process where a company’s affairs are completely wound up. All of the assets of a business are sold and then distributed accordingly to various creditors and shareholders. There are many different forms of liquidation, including voluntary and involuntary depending on the circumstances of an organisation.
The liquidation process poses several different challenges and presents various risks to a company, the stakeholders and the general public interest as well. As such, liquidation companies and the process as a whole need to be one which is transparent so that everybody is on the same page and there are no illusions as to the position of an organisation.
So, how can liquidators ensure transparency throughout the process? Some of the key aspects to consider will be outlined in more detail below.
Roles and Responsibilities Require Clarification
One of the first steps is that the roles and responsibilities of the different parties involved in the liquidation process need to be clearly laid out. These parties include the likes of the board of directors, management, the liquidator, regulators and the auditors. Each party has a duty to act in the best interests of both the company being liquidated and their creditors. All parties also need to operate within the relevant laws and standards which apply to the company they are representing.
The entire liquidation process needs to be overseen by the board which needs to make sure that the management involved is cooperating properly with the liquidation and communicating everything that is happening to the shareholders and stakeholders. Management also needs to provide any information that is requested from them in a timely manner.
The liquidator needs to be independent and impartial, providing fair valuations on the assets of the company and their liabilities. All of the assets of the business should be sold and distributed efficiently and equitably.
If everyone is on the same page as to what their role is and the rules and regulations that they need to operate within, this will make the liquidation process a lot smoother and it will be carried out in a fair way. As such, before any further action is taken, the first thing that needs to happen is that all parties need to be briefed on their role and have the roles of everyone else explained too.
All Relevant Information Must Be Disclosed
The next step is that all of the relevant information needs to be disclosed by both the company and the liquidator. All of this information needs to be provided in a timely manner so that it can be used effectively. Having this kind of transparency is incredibly important throughout the process as it is essential for maintaining trust between the relevant parties and keeping confidence throughout the whole process. This kind of transparency also prevents disputes from arising during what can already be an incredibly stressful period.
There are a number of aspects that both the company and the liquidator need to report on, which include the following:
- Why is the liquidation happening?
- The ongoing valuation and sale of company assets.
- Both the distributions and claims to the creditors and shareholders.
- The ongoing costs and fees of the liquidation.
- The final company status.
All of this disclosure must be presented in an agreed format and needs to be accessible at all times for the relevant parties.
Ethics and Integrity
The next step is to ensure that all parties involved are upholding ethics and integrity throughout the liquidation process. This is important as it avoids any kind of conflict of interest arising as well as corruption and fraud. In order to ensure the liquidation process is fair, objective and lawful, integrity and ethics are absolutely vital. Not only this but it also ensures the interests of the company, creditors and the public are protected and respected.
There are several principles that both the company and the liquidator should adhere to. These include but are not limited to the following:
If any potential conflicts of interest arise then all parties involved need to disclose this as soon as possible so that they can be managed accordingly. So long as ethics and integrity are placed at the forefront of the liquidation process then it should be a fair and transparent process.
Hiring the Right Liquidation Company
As can be seen above, many different parties need to act right in order to make sure that the whole liquidation process is both fair and transparent. These include the likes of the company, management, auditors and creditors, but at the epicentre of everything are the liquidators themselves. As such, you need to make sure that you are doing your research and choosing liquidators who are going to act in the interests of your company and the creditors but that are also going to adhere to the above throughout.
There are a number of different options out there but one of the most appointed liquidators in the UK is Simple Liquidation. We offer a fair service which puts ethics and clear communication first before anything else. This makes it so that the entire process remains transparent and is subsequently as stress-free as possible for you and your organisation. If you have any questions or require any further information then please do not hesitate to get in touch.