When a business is in trouble liquidation can seem like the only option. There are several other routes to consider before liquidation however. Seeking advice early on can make a huge difference to the outcome of an attempted rescue of the company.
One option would be to go into administration, this is a constructive way of trying to save a company and is supposed to keep the business up and running whilst plans are made to attempt to rescue the business or a buyer makes an offer. To go into administration a company CVL must make an application through the high court, as soon as the application is made the company will be granted immediate protection from any creditors and all assets are protected.
Another option would be a company voluntary arrangement; this means that the company negotiate with their creditors to arrange a reduction in the amount they pay back over a period of time. By participating in a company voluntary arrangement the survival of the company is less threatened and the risk of job losses is taken away. Creditors will also still be receiving payment, although the amount is reduced.
Receivership means that the company charge holder grant a receiver to assess the worth of the company and what a possible restructure would mean. Sometimes this can result in part of the company being sold to clear debts. The receiver's aim is to recover the value of the lenders security, and for this purpose the receiver has the power to carry on the company's trade and realise its assets.
If all else fails and the central business is deemed unprofitable, and there is no chance of a trading solution, liquidation is the only option. There are three different methods of liquidation. Creditors Voluntary Liquidation is where the company makes the decision to go into liquidation. Compulsory liquidation is where the company is forced into liquidation by a creditor and member's voluntary liquidation, where a company (if solvent) can pay off all of its debts. In order to understand what the CVL best option for your business is always seek the advice of a business debt advisor who will be able to assist you and advise on the best way forward.
