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A Guide to Liquidation

Put simply, liquidation is the process of turning company’s hard assets (buildings, furniture, patents, copyrights etc.) into cash. This cash is then either used to pay off any debts, or to reap a personal benefit.

There are 3 types of liquidation, an they are as follows –

  • Members' voluntary liquidation is when the shareholders of the company deicide to put it into liquidation and the assets outweigh the debts – the company is solvent
  • Creditors’ voluntary liquidation is when the shareholders of the company deicide to put it into liquidation and the debts outweigh the assets – the company is insolvent. This is the most common and the one that will focused on below.
  • Compulsory liquidation is when a court orders a receiver or liquidator to analyse the company’s assets and decided upon the best way to deal with them.

Prior to a company going into liquidation it is the responsibility of the directors to ensure that all trading is ceased, this is to ensure that the company does not incur any further credit.

Following this, the directors will hand control over to official receivers (ORs) or liquidators, who will tell the company's creditors and contributories (mainly shareholders) that the company is being liquidated.

Although the process of liquidation can be a pretty grim prospect for any company, it isn’t necessarily the end. There are a few alternatives to liquidation; this is where the team of business recovery professionals LinesHenry can help.

LinesHenry are a team of well established insolvency practitioners who with expertise in business recovery/turnaround and access to several areas of funding are able to identify solutions to any debt problems.

With the help of LinesHenry, the company can be put into administration. This will give the company some breathing space from any action from its creditors, allowing it to:

  • Survive, either as a whole or in part
  • Set out a voluntary arrangement or compromise with its creditors
  • Get a better idea of its assets than it would if it was to go into liquidation

If this is not possible then LinesHenry will ensure that the all of the company’s assets are distributed equally amongst first its creditors and then shareholders.

For Liquidation advice and help, please visit www.lineshenry.co.uk or call free on 08081446611.

Source: www.ezinearticles.com