Winding up a company is seldom an easy thing to do. The decision to do so is usually a hard one, as putting an end to a business’ existence as a commercial entity has many repercussions. It is a long, bothersome process, but in many situations, liquidating a company is not only preferable to the alternatives but absolutely necessary. However, it must be done right – all the procedures must be observed in the right order, and the whole thing must be done at an opportune moment. The upcoming holiday season may just be such a moment.

What is liquidation?

Liquidation is the process of closing down a business. In brief, it features selling off all company assets, using the acquired funds to satisfy outstanding debts to various creditors, dividing remaining dividends among shareholders, and finally – closing the business down.

After the decision to liquidate a business is made, the Companies House marks the company’s status to ‘Liquidation’ to represent the fact that it is being wound up. Thereafter, the business is usually deposited in the care of a liquidator, who takes actions to ensure that the company’s affairs are brought to a close successfully.

What is Solvent Liquidation?

Solvent liquidation happens when a functioning company that is not in financial distress gets closed down. There can be a variety of reasons for this to take place – the company may have fulfilled its purpose, it may have lost key assets or personnel, or it could be on the verge of becoming less commercially viable.

Whatever the reason behind the decision to close down maybe, a company can do so by undergoing a Members’ Voluntary Liquidation (MVL). This usually involves hiring a liquidator who brings the business to an end in a manner that is practical and convenient for all involved parties.

What is Insolvent Liquidation?

Insolvent liquidation happens when a company cannot continue operations due to financial reasons. The company itself can initiate the procedure with a decision of its director or shareholders holding at least 75% worth of its shares. In this case, the company undergoes the Creditors’ Voluntary Liquidation (CVL).

Procedures to liquidate a company can also be initiated by a creditor who is owed at least £750. If the company can’t pay debts due, the creditor can force it into liquidation via court action. This is called a compulsory liquidation.

The procedures in both cases differ, but in either case, an insolvency practitioner gets appointed to wind the business up and liquidate the insolvent company’s assets. The money acquired by selling an insolvent company’s assets is usually insufficient to satisfy all the company’s creditors, but getting good London insolvency practitioners on the job can go a long way towards doing so.

Why Start Liquidation Before The Holidays – The Pros

There are many intricacies and crucial details when it comes to liquidating a company. It is not something that happens overnight. It takes time to get all the paperwork in order, file all the documents with the right institutions, and notify all interested parties of the company’s intentions. Terms must be observed – and they often involve waiting a couple of weeks for the gears to start turning.

Additionally, the decision to close down the company is not necessarily tied to the immediate cessation of all of its business activities. In fact, that’s not the right course of action for most companies at all. Doing so may cause the business to incur undue amounts of financial loss. Unfortunately, at the same time, ongoing liquidation usually can hinder business processes in a company significantly.

As a result, it makes sense to start liquidation procedures just before an ebb in business activity. This ensures that the inevitable downtimes overlap and that they would not unduly damage the company. The holiday season represents one such lull that business owners can use to their advantage. Many companies have adopted the practice of using this period as an opportunity to wind things down anyway, as it could be very difficult to be productive around the holidays.

What are the Downsides to Starting Liquidation Before Christmas?

Using the lull in activity to get a liquidation in motion is a good idea, but the current situation presents quite a few challenges you will need to overcome. The whole COVID-19 situation doesn’t seem to abate in the UK, and since you’re going to have to do a lot of work with many different interested parties, lockdown measures will make things difficult for you.

Additionally, many organizations that are key for putting the liquidation procedures in motion are going to be under duress, understaffed, overworked, etc. Undergoing liquidation in a period of several ongoing crises will not be an easy task – you may end up having to wait longer than usual and encounter unforeseen difficulties every step of the way.