What does it all mean?
In Short -Liquidation is the process of dissolving a company / business. This involves utilising any assets to pay creditors.
When a business is not able to pay the debts it owes, its creditors may decide to petition for a winding up order. If the debts cannot be paid back before the court date and the application is successful and the order made, the business accounts are frozen. Any assets would be liquidated and divided between creditors.
When a business is not able to pay the debts it owes and the owner/directors/shareholders recognise this, they can instruct an insolvency practitioner to close the business. The liquidator takes control of the company and oversees the liquidation process. This is the most favoured route of liquidation.
This is a formal binding arrangement which is agreed with your creditors. Not all creditors may agree, but a 75%majority vote (by value of the amount owed to them) will secure the deal. Even if some creditors do not vote they are still bound to it. This becomes a legally binding contract which will stop any interest on monies owed and will pay back creditors a proportionate amount of what they are owed.
Creditors Voluntary Arrangement
This is another option that has started to become more popular of late. Many businesses have started off with a strong core idea , have diversified over the years and found themselves in financial difficulty. If this core business could still be profitable, it may be still able to trade by setting up a new company. The business is valued by an independent third company to remove any doubt of under valuing before any assets are moved into the new company.
Pre Pack Administration
This is an arrangement in which the business and its assets are sold prior to an administration. The administrator usually actions the sale on his appointment, this does not require any approval of court or creditors. There are safeguards in place to ensure that the sale is transparent and legal. This can help with both continuity and the preserving of jobs , whilst maintaining the value of the business .
It is often possible to achieve profitability from a former loss making business by restructuring. We can give you objective advice and create a restructuring plan. This plan usually consists of some insolvency procedures and a reduction of the workforce.
You can only be made bankrupt by an order of the court . This happens when you yourself (the owner of the business) or usually a creditor, makes an application to court. Once the order is made the assets will be frozen by the official receiver (an individual from the courts insolvency service), who will usually appoint a Licensed Insolvency Practitioner, to be your trustee. It is then the trustees role to realise your debts, including the sale of any assets , for the benefit of creditors.
You are usually released from bankruptcy after a year, although in some cases the administration of the bankruptcy can take longer.