As a business owner, you will understand that it is never easy to run a business and you will find that you face a lot of hurdles. Recently, running a business may have been even more difficult for you due to the global pandemic and war in Ukraine.
With all of this said, it is really important to recognise the potential challenges that you might face and know how to handle them.
In this blog we are going to discuss what will happen if your company goes into liquidation.
Essentially your business will become insolvent if you can’t pay the bills as and when they fall due, but there are also two ways a company can go into liquidation.
This can be voluntarily, through a procedure called a Creditors’ Voluntary Liquidation (CVL) or involuntarily, which is through a Compulsory Liquidation where a creditor will petition for your company to be wound up by the courts.
The liquidation process
The steps within the process will depend on the type of liquidation you face, however both processes will be overseen by an insolvency practitioner, involving the sale of all of the business assets.
This will then be followed by the complete dissolution and closure of the company.
Compulsory liquidation
As mentioned above within the compulsory liquidation process you will have a creditor who will arrange a Winding Up Petition with the court.
The reason for this is that they are trying to recover the outstanding debt that your company owes them.
Shareholders or any other interested party can present a WUP to the court but they have to have a legitimate reason for doing so.
Ask yourself this, does your business fall into any of the following categories? If the answer is yes, you could be forced into liquidation:
- Debts and liabilities exceed the value of all assets
- You are unable to pay debts and creditors are taking action
- You are in arrears with HMRC
Voluntary liquidation
A Creditors Voluntary liquidation is generally less stressful as the process can be planned in advance to minimise disruption.
As a director you will have access to an insolvency practitioner who will manage the whole process meaning there isn’t much for you to do. Sometimes you can find that once you have discussed your situation with the practitioner, there may be more suitable solutions.
For example, this could involve negotiation with creditors to organise a Company Voluntary Arrangement (CVA) which will reduce your monthly outgoings.
The biggest bit of advice that we can give you, is that once you know your business is insolvent you need to take action straight away.
Delaying this can lead to a further increase in company debts which will then put you at risk of being held personally liable.
How can we help?
We offer FREE consultations here at Forbes Burton where we can fully assess your business and give you our opinion on whether we think it needs to be liquidated or if you are at risk of this happening. Find out more information about company liquidation’s.
If you think your business is at risk being liquidated or you think it is the right thing to do then you can get in touch with the team at Forbes Burton for further information and advice.
If you are certain that you would like to liquidate your company you can get in touch with us here for a quote. Alternatively, give us a call on 0800 975 0380 to speak to a member of our team.
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