When people involved in building a business agree to cease trading, it is called voluntary business liquidation. This step is taken is an ultimate measure to settle accumulated outstanding debts via selling business property and assets. This process is demonstrated through two methods –
- Members’ voluntary liquidation
- Creditor’s voluntary liquidation
The result is the same. To oversee the voluntary liquidation process and dissolve the company, a specialized liquidator gets appointed, usually with the consent of the creditors. On the contrary, in compulsory liquidation, the business gets forced to close by the court and creditors. Therefore it is better to choose a voluntary route, where the directors get freedom and control.
Benefits of Voluntary Company Liquidation
There is already an insolvency stress business experiences and an enforced compulsory liquidation increases the problems. There will be official investigations on the behavior of the directors during this phase, looking for unlawful activity proofs. Disgruntled creditors pressurize the liquidators to emphasize even the slightest errors.
- You gain control
On the other hand, company directors have more freedom over the voluntary business liquidation process. The directors can appoint the liquidator. You can do some background check and pick the right liquidator. This can make a huge difference in navigating the liquidating process.
- Your personal liabilities get protected
A liquidator of your choice means you get protection from personal liability claims and unfair trading allegations. Voluntary company liquidation reveals that you are taking proper steps in the best interest of your business. It prevents the directors from taking full responsibility for the outstanding debts, which otherwise you may become responsible to pay if you ignore to cease trading.
- Enjoy a fresh start
The outstanding debts get written off as well as relevant legal action gets halted. The proceeds from the sale of assets will cover the staff and creditors. Bankruptcy process stress, as well as the concerns to handle dissatisfied creditors and court pressures, get averted. The director is free to plan a new business venture without any tag-on.
Voluntary business liquidation means you eliminate disturbing court appearances.
Drawbacks of Voluntary business Liquidation
As soon as, the decision to undertake voluntary business liquidation is taken all the commercial trading activities get terminated and windup starts. This is a hard decision because it can impact everyone associated with the company. Every business assets get sold to repay the creditor’s dues.
The voluntary business liquidation process means the director is responsible to make arrangements for the shareholder meeting and conduct the voting process. On agreement, it is crucial to appoint a reliable liquidator. The process cost can be in thousands depending on the complexity of tasks involved.
Directors conduct get investigate and even if you have done nothing wrong, you can be prosecuted. Some directors offer personal guarantees on overdrafts or loans. The creditors will be responsible for this on the initiation of the liquidation process.
Liquidation is not a great experience for any business. Insolvency Experts offer good advice, which helps to minimize losses and stress during this hard phase making navigation a little easy.