Corporate Recovery: Liquidation
There are two types of liquidation, those being Creditors’ Voluntary Liquidation and Compulsory Liquidation. Creditors Voluntary Liquidation occurs when the company’s shareholders and board of directors agree that the company should be placed into liquidation because payments can no longer be made. In terms of Compulsory Liquidation, this occurs when a creditor has been contacting the company over a payment not being made and after discovering they cannot collect this they petition in court for the company to be liquidated. Whilst the idea of liquidation can appear rather worrying if your company is placed into Compulsory Liquidation it can come with a lot of benefits that you might have previously overlooked. Here we’ve detailed a few of the key advantages you may find as a result of your company’s liquidation.
For a lot of business owners it can be hard to find any silver linings in such as dark time but for some, it can be a blessing in disguise. With the liquidation of a company comes a new freedom from the everyday stresses of dealing with a company and specifically its insolvency issues. It offers a time for a fresh start to either move onto new business ventures or perhaps move into a new line of work altogether.
As part of the liquidation process, because your company is no longer able to repay its debts they are consequently written off. Unless you have made any personal guarantees with your company debts, as your company’s director you will be no longer liable to make any payments. This means you are not at risk of being snowed under financially by any existing debts, you are free financially to move on.
If there is has been any legal action against your company this is all stopped as soon as you go into liquidation. It is only if you have made any personal guarantees that make you liable for these debts but outside of that, creditors can no longer proceed to take legal action against you.
Often one of the biggest worries for directors is what will happen to their staff when they go into liquidation. Fortunately they will be able to claim redundancy pay from the money gained by liquidating the company’s assets so you are not responsible for any of these payments. If the liquidation of assets does not cover the full amount of redundancy pay for all staff there are means in place to protect them. The National insurance Fund is in place for these specific situations to pay out any redundancy/uncollected wages for staff.