Liquidation Doesn’t Have To Kill Your Business

If a company is finding it difficult to cope under the weight of outstanding debts or have taken a hit from the economic recession the director/directors may conclude that the best course of action is to close the business. Referred to as a Creditor’s Voluntary Liquidation, it essentially involves the creditors agreeing to liquidate the assets of the business and take a share to reduce their losses.

At this point an insolvency practitioner will be chosen to assist the liquidation and make sure the assets of the company are valued at the best price and then sold to the highest bidder. This does not stop a director of the original business starting up a new venture and bidding for some or all of the existing assets. Essentially this allows all the directors of the business to found a new company and continue trading without the old company’s debt.

This is an option that can work quite well for some businesses but before considering this option, the directors of a company must be certain that they will avoid allegations of wrongful trading by the liquidator of the original business. If the practices of the directors are called into question they may face legal action and could acquire some of the old company’s debts.

If a director is attempting to purchase the assets of a liquidated company there is no guarantee that the liquidator won’t sell them to an alternate bidder. One way to avoid this scenario is to agree a ‘pre pack liquidation’ process, also known as ‘Pheonixing’ which involves a predetermined deal with the liquidator before the liquidation process.

Liquidation in this fashion is often considered a quick-fix solution to evade debt but the process will only be considered if the company will fail regardless. If a company does fail, the creditors will lose out anyway and most businesses will try and avoid further job losses and end of trading. Businesses that are healthy but, due to circumstances outside their control, have fallen on hard times will benefit from this procedure.

If you are looking for the best business liquidation advice then visit The-Business-Debt-Advisor for useful business debt help.

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