Alternatives to Company Liquidations – what are my options?
When a company is experiencing financial difficulties and hardship, it does not necessarily have to result in liquidation.
Liquidation spells the immediate end of a business, but there are alternatives that can keep the company trading and subsequently prevent widespread redundancy.
As a result, these are often the preferred routes taken by most companies that are faced with key financial decisions.
This provides an insolvent company with a period of protection and means creditors cannot take any action without court permission.
As a result, a company can assess its options and come up with a strategy to avoid entering liquidation.
Administrators will look to rescue the company first of all, before then looking to achieve the best possible results for creditors if that is not possible.
In many cases, entering administration can lead to Company Voluntary Arrangements or the selling of assets as a going concern.
Company Voluntary Arrangement
These sorts of agreements can help an insolvent company to find a way of delaying or compromising the payment of its debt with its creditors.
It is a highly flexible arrangement and will replace the existing terms of any contract drawn up with creditors with a set of new terms outlined in a Company Voluntary Arrangement proposal.
In the majority of cases, creditors will support a CVA as it can return better outcomes than if the company was to be liquidated and its assets sold to the highest bidder.
Not only do these types of agreement allow for continued trading, but certain aspects of a business can be protected should it be required.
The alternative methods listed here mean that liquidation does not need to be the first thought for a company that is struggling.
By Phil Smith