Although many people assume that business liquidation is only applicable to those that are officially insolvent, this is not always the case. Liquidation is a process which works for both solvent and insolvent companies, with the principle difference being that the proceeds of insolvent liquidation go to creditors. If the directors and shareholders agree to wind up a company they can do so. There are a couple of reasons why this might happen rather than selling the business to another party. The first is if the owner is retiring and there is no one to take over. The second would be if the business now has no purpose to exist.

There can be certain tax benefits to winding up a company this way, depending on the circumstances. There is also no need for an investigation as to why the business failed, as happens in insolvency liquidations. These include:

• Group simplification – eliminating dormant legal entities to achieve a more cost efficient company structure;
• Savings in audit and accounting costs;
• Savings in management time preparing financial information, tax returns and annual returns;
• Recognizing and avoiding corporate memory loss, the loss or lack of transfer of knowledge within an organisation caused by departing senior executives;
• Reducing the number of directorships held personally.

Liquidating an investment essentially is the process by which a company (or part of a company) is brought to  an end, and the assets and property of the company are redistributed into money (which is a liquid asset). In some cases, the shareholders decide to involve an IP in such liquidation in order to ensure:

• Cancellation of contracts and identification of liabilities;
• Supervise the maintenance of accounting records;
• File tax returns (VAT, dividends, income tax from the liquidation of a legal entity );
• Call shareholders’ meetings;
• Organize the audit of the liquidation and respond to auditors’ queries.
• Elaboration of a detailed and professional liquidation plan;
• Coordinating different functions such as client relationship management, accounting, legal, transfer agent etc.

Going bankrupt can mean that many of your debts will be written off. However, bankruptcy doesn’t cover all debts so it’s important to make sure you know whether any of your debts won’t be covered and put plans in place to deal with them.

Personal insolvency proceedings after a petition to the court. This happens when people are not able to pay their debts. It takes away most of their property (for example, their house and other valuable belongings) and the money collected from selling these is then shared among the people they owe money to (their creditors). As a result of bankruptcy, someone who has been made bankrupt (the debtor) cannot act as a company director and, if they trade as an individual, they must trade in their own name. An IP may act as a the trustee in the bankruptcy.

The judiciary liquidation is a process under the creditors and Court control, whereby a company has its assets realised and distributed to satisfy, as far as possible, its liabilities and repay shareholders. This is also a terminal process, followed by the dissolution of the company.

The key challenge for an insolvency practitioner under the insolvency procedure is to act quickly and judiciously to identify and implement the best solution, in order to realise as much of the company’s assets as possible.

A procedure that allows an IP (acting as the administrator) to try to rescue a company or sell its assets to repay all the creditors as much as possible of what they are owed.

A procedure that allows someone who owes money to enter into an arrangement with creditors to repay all, or a percentage of, the debts. The IP (acting as a supervisor) makes sure the agreed terms of the arrangement are met. Companies can also enter into voluntary arrangements.

A procedure to recover money lent to a business and put the business into the hands of an Insolvency Practitioner (acting as either a receiver or an administrative receiver) for a ‘secured creditor’ (such as a bank).