Is corporation liquidation the best course of action? Maybe, but be careful—liquidating your limited corporation has a number of drawbacks.
It’s never simple, but sometimes essential, to decide to liquidate your business, thus it’s crucial to have all the information before making that choice. There is no turning back once things get started, so you need to know what to anticipate.
There are a lot of things to think about before liquidating your business, aside from the obvious drawback of losing it — it can cost you more than you think!
1. The Call From Inspector
An examination into the directors’ actions over the last three years will be conducted once the liquidation process has begun. This is done to ensure that the firm has been managed effectively and that the directors have always behaved in the organization’s best interests.
Further investigations will be conducted if the inquiry reveals any anomalies. As a result, directors can be barred from office or held accountable for the company’s debt.
2. Don’t try to make any promise without thoroughly thinking!
These comments may be regarded very literally if they have been said to any of your creditors.
A personal guarantee could wind up costing you far more than you anticipated, even if you are unaware of it. If personal assurances, either written or verbal, have been issued, creditors are entirely within their rights to pursue legal action against the individual.
3. Watch out for overdrafts!
The directors are individually liable for all current account debts owing to the firm as well as for the repayment of the director’s overdraft.
The overdraft can be viewed as an unpaid debt owing to the business, and as all unpaid invoices for the business must be paid, this debt must be collected.
4. No! Never that!
The company’s assets will all—and I mean ALL—be sold. To pay their fees and as much as they can to the creditors of the company, the liquidators must obtain as much money as they can from whatever source.
Nothing is safe, and if you try to hide assets, you risk getting into further legal trouble!
5. Goodbye and goodbye
The liquidators will lay off every employee, regardless of how hard they had worked or how devoted they had been. This can sever good relationships and generate a great deal of negative feelings.
It can imply that they won’t be eager to collaborate with you again and won’t hesitate to tell others.
Both psychologically and professionally, going through a liquidation is a challenging process. Additionally, if it occurs to you too frequently, you risk being blacklisted from being a director of any future companies.
Next actions
Although there are certain drawbacks to liquidating your limited business, as this essay should have made clear, there are also benefits. Call us freely at 0410 555 999 if you are considering closing your business but are unsure of the next step. We would be pleased to go over your alternatives with you in detail with one of our helpful experts.
