In this blog, Company Rescue Specialists, Forbes Burton discuss everything that you need to know about company liquidation, so you can be prepared for what is to come.
It is common for business owners who are struggling will put off liquidating their company because they feel that the actions could affect them personally, but the truth is, it won’t.
The liquidation of a company can happen in two ways, either compulsory liquidation or voluntary liquidation. During both types of liquidation the assets of the insolvent company are sold, and the proceeds are used to settle creditors. Let’s take a look at what you need to know about the two types of liquidation.
Compulsory Liquidation
This is a court-based process, during this type of liquidation, a petitioning party (creditor, shareholder, Secretary of State or official receiver) will lodge a winding-up petition with the court for closure of the insolvent company so it can pay the debt it owes. Your business may be at risk of a compulsory liquidation if it fits in the criteria listed below:
- Unable to settle overdue debts
- Value of all assets are below total debts and liabilities
- Taxes are owed
- Failed to re-register as a private or public company
- Number of members in the company is below the statutory minimum required
- Failed to commence trading within the statutorily established period
Overall, all legal actions taken by creditors once the liquidation of the company begins are considered void.
Voluntary Liquidation
Voluntary liquidation is less stressful because the whole procedure is planned correctly and the directors of the insolvent company can seek the guidance of an insolvency practitioner all through the liquidation process. Companies may want to initiate liquidation voluntarily when they owe a lot of debt to recover through recovery procedures such as financing and administration.
A creditors voluntary liquidation can take as little as a couple of months if all of the paperwork is supplied on time and there are only a few assets to be sold.
It is important to remember that directors are not held liable when a limited company can’t settle their debts, but there is a possibility that directors will be ordered to pay a contribution to the company’s assets if they are found guilty by the court for wrongful trading. Following on from this, if you have liquidated your company and then decide to set up another business, as long as you were not in the wrong, you can still set up a new one.
How Can Forbes Burton Help You?
Forbes Burton can help with the full process of company liquidation, if you would like to find out more information please get in touch with their team.
Call on 01472 254914 or email rick.smith@forbesburton.com.
