- Business and Employment
The process of liquidating a company
In recent years there has been a massive resurgence of people starting out a business on their own in an attempt to better themselves. Whilst this is a noble aim and goal, for a lot of people it came directly from the impact of the international banking crisis.
Unfortunately the very same banking crisis that caused so many to set out on their own has also led to many companies failing to keep their business afloat. Please note that liquidation applies to limited companies whereas administration applies to larger companies, such as national stores, football teams etc.
What is company liquidation?
In effect, company liquidation is a way in which assets of a company are dissolved. This is not a decision that should be taken lightly since in effect, it means that the company is no longer allowed to carry on trading.
This process involves various steps with the first being that (as mentioned above) that the company ceases all trading. This is done legally by contacting Companies House and informing them in written notice that the company is entering the first stages of liquidation.
After this, the more in depth work begins. This entails settling the final business proceedings the company currently has and can take up to a year for all of this to be finalised. The liquidator at this stage will effectively run the business for you for these previous commitments to ensure that the tasks are carried out correctly during this trying time.
Such tasks would include finishing any work that the company has taken on (and been subsequently paid for) to ensure that there are no legal claims made against the company. The reason why the work would be finished is that since the company is liquidating due to cash flow problems, it cannot simply give the clients their money back.
However the liquidator will also go through the financial records of the company to assess if there is any money that can be retrieved from the now defunct business. This could mean selling off any assets that will no longer be needed and some monetary valued could be gained from the proceeds of a sale. This may include things like high tech equipment such as laptops, tablets etc. It may also include any vehicles that are paid off, but registered under the company. This could go some way to paying off the debt that the company has generated.
The liquidator will also assess though if there are any companies that are in debt to the now defunct one. Whilst it is true that once a company enters liquidation that it can no longer trade, this does not mean that anyone or any company that owes the liquidated money has got off lightly.
Rather, they will still be legally entitled to pay the liquidated company what it is owed. The difficult exception to this rule would be in the case whereby the company which owes money to the one which is liquidated has either entered liquidation or administration itself. In that regard it will be much harder to recoup some of the funds in this scenario. However, this is something that the liquidator will pursue at great lengths to ensure all debts are paid back be it in part or in full.
Hiring a professional liquidator
Whilst this is a highly stressful and trying time for the business owner as well as the employees (if applicable) it is a necessity to hire a liquidator since they will carry out the processes listed above. However, as with any process involving a company, this procedure is not free of charge.
To that end it is important that a qualified and professional liquidator is employed to make the final transitions of the company as smooth as possible. The process should also not be dragged out for longer than need be, which would only be in cases where the liquidator wishes to further increase the amount of money that they make from the ending of your business.
There are various company liquidation services in the UK (a quick Google search of 'company liquidation services UK will give plenty of results', many of which offer free and impartial advice in the run up to liquidation, as well as being able to provide the service of carrying this task out. Whilst it is a sad and distressing time, having impartial guidance such as this is highly beneficial since it can make the whole process a lot easier to cope with business wise.