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Home Finance

The Advantages Of Business Liquidation

by msz991
December 4, 2021
in Finance
4 min read
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The Advantages Of Business Liquidation
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The global market is well into the fourth industrial revolution. There will be many companies that will become redundant to the world economy. The business landscape is changing vastly, with virtual workspaces becoming a norm and social media marketing taking off, some sectors growing enormously; others are shrinking and disappearing altogether. 

So, if your business is among the many facing possible liquidation due to landscape changes, or other reasons, you are probably wondering what to expect. 

It’s not necessarily as bad as many people make it out to be. On the positive side, you may start a new business if the procedure is performed correctly and before it’s too late, saving yourself and your partners from heavy debt burdens. The company liquidation process doesn’t have to be complicated, and in many cases, the cost is not astronomical.

The following advantages make it a great reason to opt for liquidation.

Table of Contents

  • Put An End To All The Stress
  • You Can Pay Debts
  • Legal Action Is Halted
  • Employee Salaries Will Be Covered
  • Cancel Your Lease Arrangements
  • Staff Can Claim Redundancy Pay
  • Avoid Court Processes

Put An End To All The Stress

Liquidation will remove all the stress from your business life because it will no longer exist. A company will sort out all the tasks and paperwork on your behalf and assist by covering all the legal work and court visits. Going into the process of liquidation might seem like you have failed. But it is not always in your control when a company no longer makes a profit.

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If you do this correctly, the only thing that will be keeping you up at night is a reason to start a new company or decide to enter the workforce and find a job. Opting for liquidation may also include that you won’t have to spend time in court as professionals handle the process.

You Can Pay Debts

The insolvency practitioners will sell all your business properties and assets on your behalf. With this money, you are obligated to repay any debt that you owe from the business. 

This is great as once the procedure is finished, you will walk away with no debt, and you can restart your life on a clean page. You can file for bankruptcy as well if your assets are not enough to pay off all your debts. 

Legal Action Is Halted

Once liquidation is complete, no claims can be brought against the business. This is because your company no longer exists. The only time that you may be held liable to prosecution is if it’s voluntary insolvency. However, when you are in this position, you will get all the legal help to get you through any claims made against you.

Employee Salaries Will Be Covered

Once all your assets are sold, and all debt gets paid. You may encounter that you still owe your employees salaries. Liquidation will protect you from having to fork out this money.

Most regions have government funds that employees can claim from if a liquidated company cannot pay them. 

Following all the procedures to ensure that you are within the law can offer you protection when paying debts and all money owed to staff and creditors. It may sound like a scary event, but in the end, you will be saving yourself from further financial ruin by opting for liquidation. 

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Cancel Your Lease Arrangements

Not only will you minimize any debt repayments you have accrued to date, but you can also prevent any further payments going forward.

Typically, any lease or hire purchase agreements will be terminated when you liquidate your company. This means you are no longer liable for any subsequent payments that may have comprised part of your original arrangement.

Staff Can Claim Redundancy Pay

Members of staff will be made redundant by the liquidator, and if eligible, they can start their claim for redundancy pay and other statutory entitlements. If monies realized from the sale of company assets are not sufficient to cover redundancy payments, staff have an alternative route by which to claim what is owed. The National Insurance Fund pays out for redundancy, unpaid wages and holiday pay should the company not be able to do so using its own funds.

Avoid Court Processes

By voluntarily choosing to liquidate the company, you can avoid being petitioned through the courts and be able to demonstrate to the public that liquidation was a company choice rather than a result of hostile creditor action.
Having identified some of the advantages of this type of company liquidation, let us now look at the main disadvantages of the process.

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