Business Liquidation

If you are unable to meet business debts and your outgoings outweigh your assets, your first action must immediately be to consult with a business turnaround professional. They will examine your firm and your financial difficulties in detail, to ascertain whether or not the business can be saved. If not, you will likely go into business liquidation. This means that the firm closes and its assets are turned into money, which is used to pay off its creditors.

Many business owners are unclear as to the difference between liquidation and administration. Both apply to firms at the stage of business liquidation, although the objectives differ. An appointed business administrator will try and save an insolvent company, whilst a liquidator’s main aim is to wind down the company and ensure that all creditors’ debts are fully paid. In both instances, however, only secured debts are given priority. Unsecured debts will all be grouped together and the relevant parties notified of this by a liquidator.

The Two Main Types of Business Liquidation

  • Compulsory liquidation A creditor will petition the court, indicating that they are owed money by the business in question, who cannot pay and does not have enough current assets to cover its total liabilities.
  • Voluntary liquidation Voluntary liquidation is always much preferable than compulsory business liquidation, as creditors will invariably declare that the company has not acted in its best interests, which may bring forth fines and disqualification. With voluntary liquidation, the directors or shareholders of a company decide to put the business into liquidation as it cannot pay its debts and an insolvency practitioner is then instructed to liquidate the company. This can only take place if there are enough assets left to cover the total outstanding amount. If there are no assets, however, you may still enter insolvent liquidation. When the company has gone into liquidation, the directors, who no longer run the business, are obliged to co-operate with the liquidator in recognising all assets, liabilities and other relevant financial details.

In the worst case, depending on the structure of your business, you may become personally bankrupt after your business is declared liquidated. This tends to occur if you have provided personal guarantees to cover company borrowing, or if you already have substantial personal debt.

One way for limited companies to avoid business liquidation is to take out adequate public liability insurance. Although an added expense, this insurance could protect you from claims made by a customer for tangible or non-tangible damage. Compensation awards can be for considerable amounts of money, as can legal fees – all of which can make a significant impact on your business and drag it under.

How Touch Financial Can Help

The specialist team at Touch Financial will attempt to save your company by recovering outstanding debts, securing additional business borrowing from our panel of carefully selected lenders, Invoice Factoring or examining ways in which to reduce your outgoings. Our long-standing experience and knowledge of insolvency practices and procedures help us to analyse your specific needs and problems. We want to help you avoid entering liquidation and may be able to suggest some potential options available to your firm.

We have helped hundreds of firms to turn around their businesses and avoid liquidation, so ring us today on 0845 3889725 or simply complete one of our online quote forms. We will respond to you quickly, obtain the facts and paint a clear picture of where your business is at and what options are available to you. You need to act quickly, to avoid you and your family being subject to personal liability.

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