This guide is intended to help you understand the difference between compulsory and voluntary liquidation, and give you the alternatives you may not be aware of.
Types of Liquidation to Understand
There are three ways that a company can be placed into liquidation;
This process enables shareholders to close a solvent company (i.e. it holds assets which exceed, in value, its liabilities) and extract the remaining assets/cash at a lower tax rate than would normally be applied if this process wasn’t used.
This process is used when a company is insolvent and there is no other option than the company ceasing to trade and is wound up for the benefit of creditors. The assets are realised and sold as soon as possible with a view of paying a dividend to creditors.
This process is the result of the court granting an order to wind up the company following the successful presentation of a petition by a creditor. To petition to wind up the company, the creditor needs to be owed £750 or more.
Once wound up, the case is passed to the Official Receiver who deals with the company and its assets. They call the director(s) into their offices to conduct an interview and to discuss the affairs of the insolvent business.
Can You Stop a Company from Being Liquidated?
If your business is in danger of being issued winding up proceedings, the first thing you should do is contact an insolvency practitioner to discuss your case. Regardless of the scenario, time is ALWAYS of the essence as you only have a limited time before your actions become futile.
Remember, the longer you put off the problem the harder it becomes to make a recovery. If you’ve already gotten to stage 4 without taking action, then there is nothing further that can be done unfortunately.
Alternative Options to Consider
Sometimes entering into voluntary liquidation is not the best decision, even when there is little or no hope of recovery. Depending on your circumstances, we may suggest that you consider one of the following options instead of voluntary liquidation:
Both are options which can be utilised to recover your business. For further details on these processes, please download our specific guides which can be found on our website.
We can help you postpone or avoid a compulsory liquidation, and depending on the circumstances, we may even be able to get the business operating lucratively again.
For years our licensed insolvency practitioners have utilised a combination of experience and networking skills to successfully help struggling businesses in every industry.
It is our responsibility to give you the best and most suitable advice for your company, so call us today on 0800 644 6080 or email email@example.com for more information. We have an extensive network of 72 offices offering confidential director support across the UK.
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