Company Liquidation: How to avoid business liquidation

The threat of company liquidation can be incredibly challenging to manage. Not only do you have financial concerns, but you also have an unhappy staff base and a list of creditors contacting you regularly about payments. Don't panic. Insolvency is only ever a last resort, and you likely have more options than you think. Take a step back and look at your business liquidation options, your expenses, and your position. You may find another solution.

What is Company Liquidation?

Definition of Company Liquidation

Company liquidation is the process of bringing a business to an end, typically due to financial difficulties, and distributing its assets to claimants. It marks the cessation of a company's operations and the dissolution of its legal existence.

Types of Liquidation

• Compulsory Liquidation: Initiated by creditors through a court order.
• Voluntary Liquidation: Initiated by the company’s directors or shareholders.
  • Creditors' Voluntary Liquidation (CVL): When the company is insolvent.
  • Members' Voluntary Liquidation (MVL): When the company is solvent but decides to close.

First Step to Avoid Company Liquidation

Assessing Current Assets

One of the first steps in pulling yourself out of financial problems is to look over your current assets and identify any potential cash flow. If you possess high-cost items such as property or vehicles, consider whether you can sell these items to release their monetary potential. You may be able to sell the physical property where your business is located but retain the lease from the new landlord, meaning you don’t even have to relocate. If you own a fleet of cars or trucks, consider selling them and using hire vehicles temporarily. A smart decision of this kind could result in the release of enough cash to pay off some of your debts, allowing you to continue operating as a company.

Second Step to Prevent Business Liquidation

Monetizing Excess Stock

If you have excess stock or products that have not yet been sold, you have a mountain of credit waiting to be realized. All stock is worth something, so consider selling it quickly and freeing up the money tied up in it. Identify stock that is not making a profit by carefully reviewing your balance sheets. Once sold, you can use the money to buy more successful, profitable stock that will help you avoid business liquidation.

Sell Stock in Wholesale Quantities to Avoid Business Liquidation

Wholesale and Smaller Quantities

You can often sell stock wholesale or in smaller quantities. For an idea of how much your stock might be worth, contact a professional excess stock seller. They can find buyers for all types and quantities of stock and do extensive market research to give you an idea of your goods' worth. Once you enter company liquidation, control of your stock and other assets will be completely out of your hands, so start thinking about releasing the investment value sooner rather than later.

Effective Use of Released Funds

Research and Market Analysis

Once you have released some of the monetary value stored in your business assets, use them correctly. Conduct thorough research into your market and start sourcing new customers and suppliers. This will help you spread your risk and avoid facing business liquidation again if your previous contacts become nervous and terminate their relationship with you.

Seeking Professional Help

Finding an Insolvency Practitioner

If you find yourself in the unfortunate position of facing business liquidation, look into finding a professional Insolvency Practitioner. They can provide targeted, personalized advice on how to proceed with your company liquidation by closely examining your business and accounts.

FAQs

What is company liquidation?

Company liquidation is the process of winding up a company, distributing its assets to claimants, and dissolving its legal existence, often due to financial troubles.

What are the types of company liquidation?

There are two main types: compulsory liquidation, initiated by creditors through a court order, and voluntary liquidation, initiated by the company’s directors or shareholders. Voluntary liquidation includes creditors' voluntary liquidation (CVL) and members' voluntary liquidation (MVL).

How can selling assets help avoid liquidation?

Selling high-cost assets like property or vehicles can release cash flow, helping pay off debts and continue business operations.

What should I do with excess stock to avoid liquidation?

Sell excess stock quickly to free up tied-up money. Use the proceeds to invest in more profitable stock to improve financial stability.

How can an Insolvency Practitioner help?

An Insolvency Practitioner provides personalized advice based on a detailed review of your business and accounts, helping you navigate the complexities of liquidation.

What is the importance of market research in avoiding liquidation?

Market research helps you understand your industry better, identify new customers and suppliers, and spread risk, which is crucial in maintaining business stability and avoiding liquidation.

Conclusion

Facing the threat of company liquidation can be overwhelming, but it's essential to explore all options before concluding that liquidation is inevitable. By assessing and monetizing your assets, conducting market research, and seeking professional advice, you can navigate through financial difficulties and potentially save your business from liquidation. Remember, insolvency is a last resort, and with careful planning and strategic decisions, you can find a path to financial stability.