Advantages and Disadvantages of Company Liquidation

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When you’re running a business, one of the things you never wish upon yourself is to go through a liquidation process. As liquidation of a company usually means its end of the business, it may seem a bit one-sided. With all of the company’s assets getting sold and with a sort of a race to repay the debts, it’s almost impossible to find any advantages in such moments.

However, over and over again we’re witnessing a number of company owners deciding to go through the voluntary liquidation process, instead of continuing to insolvently trade and expand their company’s debt. The process of creditors’ voluntary liquidation offers a number of advantages for business owners, much more than simply waiting for the company to go under. That’s why we did a bit of researching and we’ve come up with this short guide through advantages and disadvantages of company liquidation.

Advantages

When you’re forced to go through the process of liquidation, there are numerous serious problems that can cause you a lot of stress. With a compulsory liquidation, you have to go through government investigations, different interrogations, and thorough search for different types of evidence against you and your company.

When it comes to voluntary liquidation, the company’s leadership gets to decide on the specific aspects of the entire process. First of all, they can appoint a liquidator they already know and trust. This step helps them stay protected from unjustified trade accusations. Another immensely useful fact which follows voluntary liquidation is that your outstanding debts are written off. What this means is that the resources you owe to your creditors or to your staff will get covered by the sale of assets, if possible. This will leave the leadership free to carry on with their business endeavors. Of course, there is always the advantage of avoiding numerous unpleasant court appearances.

Disadvantages

The final goal of voluntary liquidation is to pay off any debts and terminate the business that has gone under with as little fuss as possible. But, nevertheless, its goal is still to terminate an insolvent business. Always make sure you’ve talked with the professionals who deal with voluntary insolvency and liquidation before you make a decision. Even though voluntary liquidation is better than a forced one, it’s still stressful and means the end of your business.

When dealing with voluntary liquidation, you are in charge of setting up all of the necessary meetings and finding the right personnel, like a liquidation officer. This process can cost quite a lot. Furthermore, you can still end up under investigation if there is any evidence that you were trading illegally or wrongfully. If you have made any personal loans and guarantees, they can be enforced by your creditors and they can ask for it as soon as you start your voluntary liquidation process. As your business goes through voluntary liquidation, all of your employees will become redundant. It doesn’t matter how close you are with your workforce, or how long you have been with them, as soon as you go under voluntary liquidation or insolvency, your workforce will have to go.

Wrapping It Up

Going through liquidation is never easy or pleasant. It’s a process that takes a lot of time and resources, but at the end of the day, it’s a necessary process that helps the world market works the way it does. When it comes to voluntary liquidation or insolvency, it’s always better to have some options and at least a little bit of free space to try and salvage as much as you can, than to simply let go and hope for the best. Do your research, talk with your coworkers and plan ahead. No one wants to think about liquidation until it’s happening to them. Don’t make that mistake – be ready in advance, and you might be able to avoid something like that altogether.

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