If you are one of the directors of a company and don’t know what is liquidation of a company, then you can get confused about company insolvency UK and can face different issues. Well, there can be a lot of reasons why you may want to consider liquidating your business. For example, there is no such favourable demand for your products and services, or your company is going through financial issues. The options can be more.
However, you should keep in mind that the liquidation process can cost you a lot, and you may need to spend thousands of pounds for this if you don’t follow the procedures properly. Well, below, we have mentioned down some important information that can help you with that. Have a look.
What Do You Mean by A Liquidation?
Before you can move to the process of liquidation, you should have sound knowledge about what is liquidation of a company? Well, in simple words, this is a process to bring your company to an end. After the completion of all the procedures, your company (limited or public) will be closed officially. All the assets will be allocated to the creditors. However, the distribution of assets will depend on whether the business entity is insolvent or solvent.
In general, liquidation of a company occurs when a limited company reaches a stage when it has been decided not to continue the business for one reason or another. In such a case, you may prefer to liquidate your business and turn your assets into cash. Assets are converted to cash to repay the debts of the company and towards other expenses.
Understanding the process of liquidation
In short, the process of liquidation involves the following steps:
- The creditors or the directors appoint a professional insolvency practitioner as a liquidator.
- Once the process starts, the powers of directors will be ceased, and the liquidator will take over the process and the company’s management.
- The liquidator will evaluate the assets and liquidate them. Besides, he/she will also deal with the HMRC debt management process and complete all the formalities.
- If there are creditors, they will be paid off first, and the remaining amount will be distributed among the shareholders and directors.
- After that, the company’s name will be struck off the Companies House.
Timeframe of liquidation of a company
Well, there is no such particular timeframe for this, and based on the liquidation type, the timeframe will vary. However, once started, the company can be placed into liquidation within around 2 to 3 weeks if all the required information is available. As per the experts, the process can take around one year, and this can last more than one year if you are liquidating a larger company.
Understanding the role of the liquidator
Speaking about a liquidator, he has various authorities that enable them to sell or liquidate the assets of a company and use the recovered money to clear the debts. The experts will deal with the process, paperwork and will also inform different authorities about the process.
- They will act as a third party or as an impartial to take care of the process of liquidation from beginning to end, after their appointment.
- They create the Statement of Affairs document that can show the business’s financial statement.
- The liquidator distributes the realised assets as well as surplus funds to the appropriate parties.
- They compile a report stating the reasons behind the liquidation.
Well, liquidating a company is a complex process, and there is a lot of things and paperwork that should be completed in a proper way. If you want to make it smooth and fast, hiring an experienced liquidator will be the right option.