The primary objective of any business is to expand its market share and gain a competitive edge. However, because of external factors and sometimes a lack of vision from the higher management may hamper this objective. In such a case, companies may sometimes need to file for bankruptcy. Here comes the role of a liquidator. They help in overcoming the debts by selling off the assets.
Process of liquidation
- The decision to voluntary liquidate
- You have to dissolute the company, or the court will ask for dissolution when you are not able to pay the debt.
- Either the company or the court appoints the insolvency professional (IP) as the official liquidator.
- The liquidator takes over the power from the director of the company.
- The liquidator assesses the asset before dissolution
- The liquidator determines all the payable and debts of the company
- The liquidator distributes the fund to the creditors. Thus helping in overcoming the debts by paying off to the claiming parties.
From this discussion, we can conclude that the role of a liquidator is paramount when a company is filing for bankruptcy. If, as an organization, you have decided to hire a liquidator for the completion of the process, make sure that you look for a qualified and experienced liquidator who has experience and expertise in the insolvency process.
Why hiring a liquidator is a better decision?
When a company is closing, it is important to hire a liquidator who can help in the proper post-closure of the company. A liquidator is an officer who is specially appointed to wind up the affairs of the company when it is filing for bankruptcy. In such cases, they help in the selling of the assets of the company, thus raising the fund, which helps in paying back the debts of the company.
How does a liquidator help the company?
- Overcoming debts- what are the primary benefits of having a liquidator by your side is that they help in getting over the debt from the company. The pressure of mounting debt can be overwhelming for business owners. With voluntary liquidation, the company cancel its assets to the creditors. Only the remaining unsecured business liabilities are written off. Since the liquidator has a complete understanding of the entire process, they help in the completion of the same with ease and in less time.
- Closure of legal action– If a company is filing for bankruptcy or is closing down, it is under a legal proceeding. With liquidation, this is halted. After the liquidation, the company is free of any kind of legal pressure, thus enabling the directors and business owners to look for other business opportunities. One of the primary reasons for opting for liquidation is to get over the debts and pay back the creditors. The liquidator helps in the closure of legal action by selling the assets, thereby paying the creditors and making the company free of debts.
- Lesser one-off cost- Liquidation requires less than cash flow. The insolvency practitioner takes their fees from the money recovered from the sale of assets. Hence it is a more cost-effective way of filing bankruptcy and closing a company than adopting the other methods.
- Staff can claim redundancy pay – One of the major sufferers when a company files for bankruptcy or its employees. In case of voluntary liquidation, the employees are legally entitled to claim for the wages arrears, holiday pay and redundancy pay from the redundancy payment officer.
- Free of the pressure from creditors -When a company fails to pay back its debts, the pressure from the creditors can be overwhelming. Paying forward corporation tax and other fees can intimidate the situation. Having a liquidator ensures that the company is able to sell off its assets and the speed of the creditors. The liquidator or the insolvency practitioner is in direct contact and communication with the creditors. They represent the bankruptcy filing company, thus relieving the pressure from the directors and business owners.
There are many reasons why liquidators are more valuable than adopting other ways to get over debts. While filing a bankruptcy is not a positive move when it comes to the credibility and reputation of the organization but to overcome the legal hassles and pay off the debts.