What You Should Remember About Liquidations

Liquidations have been described in law as the series of procedures wherein a company or part of it is put to a close and the assets related to its operations are sold to which funds are distributed to creditors and if there are any left to the shareholder.

liquidate businessIn business it is the process of taking tangible corporate assets and turning them to cash often by selling them off often in order to pay a debt and sometimes for owner and shareholder gain. Such is done voluntarily and involuntarily. In the former, the directors themselves file for it while the latter is often forced by court through action of creditors.

The process for liquidations is a long one and should be taken seriously and carefully which often necessitates business owners to hire consultants, advisers and legal personnel to assist them in all matters regarding the action. To shed some light on the procedures involved below are some brief discussions about them.

  1. A meeting between the board of directors is held where a proposal regarding the move is brought up in the case of voluntary liquidations. For a compulsory one, a court order is necessary.
  2. When a mutual and joint decision or a quorum is reached and the company’s insolvency has been ascertained or the court has already passed an order, a liquidator will be appointed.
  3. The liquidator is an individual assigned to sell all assets of the business and use his or her assigned powers with due care and diligence in the best interest of all parties involved.
  4. Distribution is then performed in the following order:
    1. Payment for the expenses involving the liquidation including legal and professional fees.
    2. Salaries and wages of all company employees should be paid off.
    3. Next, the funds are then distributed to all creditors. If the asset sales are not enough then such will be distributed proportionately to distribute the losses fairly to all parties.
    4. If there is any left, it will then be distributed to the corporate shareholders.
  5. When such matters have been accomplished, a business is considered dissolved.

Now liquidation is a very painful thing to everyone concerned with the business from stockholders to founders to officers to employees and even to business suppliers and partners. However, when there comes a time when it is needed, it is best to do have one done so that you can move on with your life.

What You Should Know About Bankruptcy

“You are going bankrupt.” This is a much dreaded situation where you would wish to magically go away. Who would want to find themselves stuck in one anyway? Now do you really understand what bankruptcy is? To make things clearer and enlighten your knowledge better we have here some facts and information to add up and amplify your knowledge.

bankruptcyWhen a company is overwhelmed with liabilities it has many options and line of actions to choose from one of which is to file for bankruptcy. Of course no one would want that as everyone would like to salvage and revive what can still be saved and from there and bring back the business up the ladder.

Before one files for bankruptcy it is important that one knows the consequences well, if not, hiring experts form that you will seek advice from will be the best action to take. To give you some useful details, we asked the experts over at www.aabrs.com for information that you and your company should know about:

  • Properties and assets will be frozen. – This is to avoid businesses from selling off their corporate assets and distributing the funds amongst its shareholders instead of using them to pay creditors. The same goes for bank accounts. Technically even if all the said properties are sold they may not be enough to pay off all outstanding debts in which case they will be distributed proportionately to creditors.
  • It is not an easy escape from your liabilities. – When you declare yourself bankrupt it does not mean that things are done once creditors are paid. When you do so you will be recorded in the credit bureau which means that it may be hard (but not impossible) for you to obtain credit and loans not until you have been removed from the list and you have already established yourself back up again.
  • It is not the only option you have. – If you are in a tight financial struggle do know that it is not your sole option there is. Find an expert who can acquaint you with them and help you assess the pros and cons of every option and determine from which you will benefit best.
  • It can be costly. – First off you would need to have consultants, lawyers and experts with you. It has to be ascertained that filing for one is indeed the best and only option that will work for your company.

A guide on pre-pack administration

With the economy today getting very unpredictable, a lot of companies are struggling financially. Some have debts and liabilities more than their income and assets. Some companies goes into mergers in order to save the business while some companies are dissolved. Others go into pre-pack administration.

What is pre-pack administration?

This is when a company’s assets are pre-sold to a buyer, usually another company or some of the directors of the insolvent company in the efforts to save the name of the company and retain suppliers and loyal customers. An administrator is then appointed to oversee a seamless transition. The main goal of this is to be able to distribute payment to the creditors.

pre-pack administrationBenefits

The advantage of this is that the company directors are given a chance to buy the assets before the business gets dissolves. This means that the directors will have to put out personal funds to purchase the assets.

Another advantage is that the company can continue to do business under new management, thereby making its loyal customers happy.

It also gives the business a chance to earn more value to its assets. If in the end, the company will get liquidated then the assets will be realized to their maximum market value. And in turn, the creditors will get paid accordingly.

No jobs will be lost, the existing employees of the company can be absorbed by the new management or the  “newco”. Although in some cases, some positions might be lost.

The operations of the business can continue to run. So the potential to earn income is still there.

Prerequisites for pre-pack administration

You need to hire an insolvency practitioner and prove that pre-pack administration is the best solution for your business. You need to prove that this is the best way in order for the company to pay its creditors.

After further investigation, your company is insolvent and that there is no way for recovery from debt. And the company has defaulted a debt of more than £750 and has failed to settle it after a statutory payment demand from the creditor.

If you think that your company falls in the these categories, then waste no time and consult a licensed insolvency practitioner so you can discuss the future of your company. Time is of the essence here. The earlier you act, the better chance there is to pay your debts and save your business. So act now!

What goes on in a Creditors’ Voluntary Liquidation?

Do you have a business that is on the verge of closing down? Are you in a situation where you are already full of debts and the income from the business is not enough to pay for the debts incurred? Then you might as well consider closing down your business and opt for creditors’ voluntary liquidation or CVL. This allows the owners or directors of the company to hold a meeting with the shareholders and creditors. The group will have to decide together and assess the situation. Once they have decided that the business is insolvent, with which a CVL is advised.

How Creditors’ Voluntary Liquidation works?

First the company hires an insolvency specialist who will give an in depth assessment of the company’s current financial situation. The assets and liabilities will be analysed and the accounting books will be reviewed to know the depth of the financial difficulty that the company is in. Once the directors have decided to close up the business, a meeting with the shareholders and creditors will take place. A chairman of the meeting will be appointed as well as an insolvency practitioner (IP) who will liquidate the assets.

The directors will need to provide a comprehensive list of assets and liabilities and open their books to the insolvency practitioner. A report will then be made which will be presented during the shareholders’ meeting, in order for everyone to see the whole picture. A valuer will also be hired in order to get the best value of the assets.

liquidationAfter the shareholders’ meeting, the creditors meeting will take place where they will vote for the liquidators who the directors nominated. Whoever will have the most votes will be handed over the task to liquidate the assets. The purpose of this is to be able to pay the creditors with the sale from the assets. Whatever is left will then be distributed to the shareholders. Once everything has been done, three months after the last meeting of the shareholders and creditors the company is then considered as dissolved.

It is a wretched process but it is also the best way for a company to pay off its debts and save the owners from personal financial trouble. In some cases, there is still money left for the owners to reinvest in another company and start from scratch. Hopefully this time, will be smart enough to balance the books before it goes into a financial mayhem.