Press Release: November 29, 2020
It’s normal for businesses to incur debts. When managed correctly and paid punctually, these debts can give you the financial resources you need to fuel your company’s growth. But when your liabilities become too much that they already exceed your business’ assets — making you incapable to pay them off — you might need to undertake a so-called insolvent company liquidation.
If your company is financially struggling and is bound to face this type of liquidation, here’s a roundup of the biggest mistakes you have to avoid at all costs.
Failing to streamline insolvency proceedings. Though the insolvency process can be quite overwhelming, it can be made efficient once you streamline insolvency proceedings — which can be done by establishing time limits and hiring an insolvency practitioner among others. Additionally, rules for the insolvency proceedings should be clearly established and clarified first before they commence.
Not informing all concerned stakeholders. It is a legal obligation for insolvent companies to disclose liquidation to the concerned stakeholders. These include directors who are not part of the wind-up process, employees, creditors as well as shareholders. In the UK, the Insolvency Act also requires the "publication of certain insolvency events in The Gazette."
Selling off assets for a low value. Many businesses resort to selling their assets to a related entity. While there’s no problem with this move, many make the mistake of selling them off at a low value. To avoid this one, you have to obtain a proper valuation of your assets or your company to determine the best sale price.
Prioritising certain creditors over the others. Another common mistake insolvent companies make is paying debts first that are owed to related entities. This practice is considered as an unfair preference payment and may prompt the recipient to return the payment or assets to the liquidator.
Making new debts. Company liquidation is one of the best routes undertaken by insolvent businesses. And to make a graceful exit, you should not even attempt to acquire new debts knowing that they can be settled once the insolvency proceedings take place.
Trading despite your business’ insolvency. Take note that this practice is a big no-no: It’s considered a civil and a criminal offence. Moreover, it can also force you to personally pay for debts incurred during trading whilst your company is deemed insolvent.
Failing to seek professional company liquidation advice. Experiencing financial struggles can be daunting. And for you to efficiently and effectively undertake the liquidation process, it’s wise to solicit professional company liquidation advice from the right figures and tap experienced insolvency practitioners. Doing so will also help you avoid committing the above-mentioned mistakes.
Bridge Newland is home to insolvent company liquidation specialists who are competent, experienced, and passionate. They can both provide shut-down and start-afresh liquidation — depending on your business’ situation. Their liquidation packaged solutions are designed to give clients the most stress-free experience possible. Learn more about their services at https://www.bridgenewland.co.uk/insolvent-company-liquidation-cvl. You may get in touch with them through their online contact page or by calling 0800 612 6197.