Winding Up

If you’ve ended up with mounting debts, and no foreseeable way to save your business, liquidation is pretty much one of the only options you have left. This is something that is pretty much the end of the line for your business, and is very hard for business owners to initiate, especially if they are emotionally invested in the business. Unfortunately, however, it is sometimes completely unavoidable so it is important to follow the right course of action when the inevitable happens. If your business is insolvent, it is likely that you are going to be involved in “winding up” your business. This is effectively liquidating your company whilst hiring an insolvency practitioner tell your creditors that you are no longer able to pay the debts you owe.

The creditors are then given the choice of voting to liquidate the company, which is generally the outcome of the meeting. The practitioner will handle all the necessary paperwork and prepare a complete review of the company’s finances to give to the creditors so they can assess the situation. After this, the creditors can try to make back as much of the money they are owed as possible, this is primarily done by liquidating assets and trying to sell off stock. The winding up procedure is generally completed very quickly, but is favoured by creditors since it gives them more control over the outcome of the liquidation. The winding up procedure is fairly simple, and can be controlled by outside parties; therefore it takes some of the pressure of you.

If your business has become insolvent, it is clear that it was not fulfilling its potential and it was time for the business to cease trading. It is very difficult, if not impossible, to revive an insolvent business, so it may actually be preferable to liquidate the company reasonably quickly, even if you are looking to continue with a similar business straight after. Some people use the winding up procedure to make a fresh start, so they can have a clean balance sheet when they start trading with a different business. However, liquidation and an inability to pay your creditors will affect you in the future and make it very difficult to get credit to start something else, so it is definitely not a perfect solution.

The winding up procedure can often be quite emotional, and far too many people get sucked in to the inner workings without understanding what is going on. It is always preferable to hire a professional to handle this sort of procedure for you, and you should always make sure you have received strong financial advice before beginning the procedure in the first place.

Winding up is just one of the many different things that can happen if you allow your business to slide into debt. Liquidation most commonly occurs when a business has carried on trading and spending at a loss for years on end without ever addressing the problem. It is very risky to accept making a loss in the hope that you can make profits in the future, so try not to make outrageous predictions about how you think your business will perform in the current years. This is yet another reason why you should hire a professional who can take an objective look at your finances and tell you straight what you need to do to save your business.

It is important that you do not hold off when deliberating over liquidation of this sort. If your business is insolvent, you cannot afford to waste time since your problems are likely to continue to get worse. You need to make quick, calculated, decisions to ensure the long term future of your business, which is yet another reason why professional help is always a good option. People with years of experience in insolvency and liquidation can help you massively in your hour of need; they will have dealt with a case like yours hundreds of times, so don’t be afraid to ask our advice.