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What to Do If You Are Facing Liquidation

LenaH December 30, 2020

If you find your company struggling and facing liquidations, it is very likely and normal to have questions about what will happen during that time. The first thing you need to know that there are two ways your company can go into liquidation; one is voluntary and one is involutory. During this process, your assets are sold, to pay back as many creditors as possible. While steps and details depend on the type of liquidation you are facing, something that is common for all the processes is that they must be overseen by an official receiver or an insolvency practitioner as well as involve the sale of all of the business’s assets, holdings as well as properly. That is followed by the complete termination and closure of the company. All in all, no matter if your liquidation is compulsory or voluntary the results are the same. 

A Compulsory Liquidation- What Will During the Process?

A compulsory liquidation will usually occur when a company or an individual, usually an upset creditor goes and gets a winding-up petition with the court. One of the main reasons behind it is that they need to recover all the debt that your company owes to other companies or individuals. That will happen because the main part of the liquidation process is that the company’s assets will be sold and the money made from that will be distributed to people who the company owes money to. Therefore, if the creditor has a reason to believe that your company has a lot of valuable assets they can petition for liquidation to recover all the money that the company owns them. Even though the petitioner is usually the creditor it is not always the case. Any interested agent can present you with a winding-up petition as long as they have a legitimate reason for doing it. 

A Voluntary Liquidation- What Will Happen During the Process?

Even though voluntary sounds like something no one does, voluntary liquidation is much less stressful because the whole process can be planned to minimise all the disruption. That is because the company directors will have all the access to the guidance of the practitioner who usually manages the whole process will be minimal for the director to get done once the whole process has been initiated. Provided that there is a reasoning to show how the voluntary liquidations will make sense and provide the best outcome for the company’s creditors, the whole process is pretty much straightforward. After you have discussed your situation with a professional, you might find that there are so many more solutions than a liquidation that is available for your company. Therefore, you must look into all the different ways you can return assets to creditors without getting into a liquidation. It is something that will require a lot of research and it is not something that should be taken light-heartedly. 

Why Should You Think About Initiating Liquidation Voluntarily?

One of the main reasons for initiating liquidation voluntarily is when they are in too much depth to recover from. That is a time when most accent that liquidation is the only logical and reasonable path they can go down. Once you have realised that there is not much you can do anymore you must take quick action to avoid collecting more depth. That means that you should ask for the assistance of a professional to discuss all the possible outcomes as well as your financial problems. By delaying this step, you are only putting your company in a worse position and it will lead to further inconvenience. Even though directors are not ones that are usually held accountable for the debts of the company if the court finds out that you are guilty of wrongful trading, they can assume that you are one of the reasons why the company owns money. That means that you will be accused of failing to properly fulfil your duties as a company director. So, by enlisting the help from a licenced professional you are showing commitment. Another big plus is that having an insolvency practitioner handling the process you are making is much easier and complicated for yourself rather than being forced into compulsory liquidation and scared out of your mind. 

What you need to realise is that liquidation, although sounds like the worst option in the world, it’s often not that bad. If your business simply can’t recover and carry on that it is for the best that it closes down and sells off all of the assets to pay off the depth. One of the best things you can do to help yourself during this process is to hire a professionally licensed insolvency practitioner also known as a liquidator to help you along the process. They will take a lot of stress and pressure off your back and offer helpful tips. 

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