A company that is ‘going under’ or said to be ‘winding up’ is enduring the process commonly called liquidation. The process of liquidation is often frowned upon, and many people know little or nothing about how liquidation services work and how the whole process is done.In this article, we are going to break down the process of company liquidation, and discuss the following key points:
- What is liquidation? • What are the stages of liquidation?
- Can you avoid liquidation? • What are liquidation services available?
WHAT IS LIQUIDATION?
As mentioned, if a company is going under or is found to be substantial amounts of debt, liquidation services seize company assets and use them to pay off the liable debts associated with that company. The company will then go into dissolution and cease to exist; further activity from the company is an offense and further action can be taken. The purpose of liquidation is to ensure that fair distribution of the surplus is provided to creditors and contributors. However, the main purpose that everyone is more aware of is the cease of existence, meaning that the company no longer exists.
WHAT ARE THE STAGES OF LIQUIDATION?
Liquidation services can be used to help relieve some of the pressure and stress associated with business failures. The stages of liquidation are self-explanatory. We have provided a simple step-by-step rundown of the stages of a company heading into liquidation:
– A winding up application is presented to the High Court.
– The applicant may choose an approved liquidator to work on their behalf.
– The High Court will make a formal decision. Statement of Affairs will be issued.
– A summary will be sent to the creditors of the associated company.
– Assets will be seized.If any surplus is left, creditors will receive a return on their capital.
– Receipts and confirmation of liquidation will be provided. Dissolution of the company will be granted.
CAN YOU AVOID LIQUIDATION?
Every company wants to try and avoid liquidation. All of that time, money and effort will ultimately be worthless if a company is heading in the liquidation services direction. Below we have included a few pointers as to how best to avoid liquidation:
- Use a Company Voluntary Arrangement (CVA) to help any financial difficulties. This has the possibility of allowing debts to be written off completely. Also use a bookkeeper to manage the company finances. If you are not financially-minded, you don’t want to be the downfall of your company. Keeping track of all money is vital for any successful business.
- Avoid having too much excess stock. Maintain your business by working out how much stock you actually require. If you are struggling financially, consider selling any high-end vehicles or possibly let some employees go. Of course, you don’t want to be seen as the bad guy, but at the end of the day, it is you and your company that will suffer in the long run.