Haylet Garnett, Solicitor
Nowadays, as the ‘credit crunch’ hits home, more and more businesses are struggling financially.
Unfortunately for some, it can seem that there are no ways around their financial problems. In reality there are now a number of ways to try and save your business.
A company is insolvent if the value of its assets is less than the amount of its liabilities, or it is unable to pay its liabilities as they fall due.
The main options available should this be the case, are Voluntary Liquidation, Compulsory Liquidation, Administration or a Company Voluntary Arrangement.
A Voluntary Liquidation usually takes place if the company is still solvent but knows that the company’s financial situation is only going to get worse. A Liquidator will be appointed to realise the company assets, agree creditors claims and distribute available funds.
A Compulsory Liquidation is generally started by the Petition of either the company, its creditors or its shareholders, in the court. If the case for liquidation is made out the court will issue a Winding Up Order and appoint a Liquidator to deal with the technicalities of closing the business.
Administrative Receivership is fairly rare, as was an Administration Order which tended to be quite costly and court driven until amended by The Enterprise Act 2002. Nowadays the main purpose of Administration is the survival of the company as a going concern, or in the worst case scenario to ensure better results for creditors as a whole rather than Winding Up.
In the same vein a Company Voluntary Arrangement can be proposed by a company’s Director, Liquidator or Administrator, and has the aim of trying to save the business and keep it afloat. A moratorium is also put into place to protect the company in the interim.
Liquidation of a Company should always be seen as a last resort and there are a number of alternatives that should always be considered prior to taking the decision to have your company wound up. Legislation now exists to assist with business recovery but action and advice must be taken as soon as it appears there may be a problem in order to ensure the Company has all options available to it to ensure its future.
For further information please contact Hayley Garnett at Heptonstalls.LLP on 01405 765661
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