Liquidation can seem like the best possible option when your company falling deeper and deeper into debt.
But while voluntary insolvency does have several advantages, we think it is important that as the company Director, you understand the potential drawbacks.
We’ve put together a three-point guide to the negatives which we hope will help you to assess your options.
Voluntary liquidation: The things to look out for
1.Missing your alternative options
It is really important to check that voluntary liquidation is the right option for you.
When liquidation is complete, everything you worked for to promote your company while it was trading will be lost – calculate that in financial terms and it can be quite frightening.
That’s why at Financial Discuss, we like to talk through your circumstances to ensure that there are no other avenues open to you which would allow you to continue trading.
The best part is, every qualified liquidator has a duty of care so you can talk to us safe in the knowledge that we will do what’s best for your business because voluntary insolvency should be a last resort
2. Unforeseen costs
Unlike compulsory liquidation – which is instigated by one of your creditors or HMRC – choosing voluntary insolvency can require that you to pay some hefty fees.
For example, in compulsory proceedings, the instigator would pay for a winding up petition.
However, if you choose to liquidate your company, you would be expected to pick up the bill for an insolvency practitioner and other fees along the way, which could total as much as £9000.
3. Accusations of wrongful trading
If you are thinking of liquidation as a quick way to avoid repaying debts to your creditors because it’s not affordable, you could be putting yourself at risk.
Once liquidation is complete, an investigation is carried out into the actions you took while the company was trading bankrupt.
If it can be shown that you did not act in the interest of creditors and you are found guilty of wrongful trading, you could be held personally liable for the company debts and be banned from acting as the director of any limited company for 15 years.
We know when you’re at the point where you feel liquidation is the only solution to your problems that many of our clients just want to get it over with.
But it is absolutely worth exploring your options and that is why we are assessing your circumstances and devising the best solution for you as quickly as possible – whether your final decision is to liquidate your company or not.
If you’d like to discuss your options or you have any questions, please do get in touch.
We’re happy to help wherever we can.