If you are in a position where cash flow can no longer support your business, it may be time to consider liquidation. In today’s turbulent world, there is little stigma attached to a company reaching this stage. External forces are complex and unpredictable, and no organisation is immune to the risk.
Many organisations facing this stage of their life cycle feel that they cannot afford professional help. However, going it alone can end up being more costly than working with someone with the qualifications and experience to ease the process.
This is a short guide to how it works.
If you are insolvent, you have:
- Run out of money
- Cannot pay your debts as and when they fall due
- Liabilities that outweigh your assets
In this position, a licensed insolvency practitioner is required to act as liquidator. You cannot draft the necessary paperwork yourself.
The term ‘liquidation’ refers to the closure of a company. It means that an appointed liquidator will take care of dealing with the company’s assets and liabilities.
There are two types of liquidation:
1) Members’ Voluntary Liquidation
This is for companies that are solvent, but where the shareholders would like to close the business and extract funds in a tax efficient manner.
2) Creditors’ Voluntary Liquidation
The most common form of liquidation, this is where a company is insolvent and a licensed insolvency practitioner is appointed to act as liquidator.
Reporting To The Department For Business, Energy & Industrial Strategy
One of the reasons that a qualified third party is required in the liquidation process is that they need to report to the Department for Business, Energy & Industrial Strategy (BEIS).
Reporting to the Secretary of State, the BEIS determines whether a director should be disqualified. This is one of the reasons that it pays to plan carefully for liquidation.
What If I Can’t Afford A Professional?
You can take control by contacting an expert at BCR, who offer FREE and confidential advice. A swift liquidation can save money and reduce stress for everyone involved.