Hmt Legal
Lawyer

Experts Can Advise You on How to Liquidate Your Insolvent Company

Starting and operating a business is extremely difficult. According to recent analysts, nearly 37% of new NZ businesses will fail within the first two years. Every day, businesses find themselves in a hard situation where they are no longer a profitable business. It is true that during the first few years of business, you may have not planned to profit. It takes time to build a reputation and establish your business. If you did not have the personal funding to reach your profitable years, you most likely borrowed from numerous lenders and creditors. When creditors expect payment and you do not have the money to pay them, they may request you liquidate your company.

Understand Liquidation and Insolvency

In business, liquidation is the process of bringing a company to an end. During this process, the company’s assets are distributed to claimants and creditors. If a company is insolvent, it means it no longer can pay the obligations that are due to its creditors or lenders. If your company has become insolvent, you will need to liquidate your remaining assets to the creditors, lenders, shareholders, and claimants. There are different types of liquidation including:

  • Members’ Voluntary Liquidation
  • Creditors’ Voluntary Liquidation
  • Compulsory Liquidation

Hire an Expert Before You Liquidate

If liquidation is the only plausible option, there are different steps you can take before you liquidate. You first should seek professional advice at a reputable business. You can find a liquidation company online at https://bwainsolvency.co.nz . When your company faces continuous losses and you decide it is time to liquidate, you must hire an expert. You will put you and your company at risk without someone who is well versed in the legalities surrounding liquidation. Legally, you must have your creditors’ best interests in mind when distributing the company’s assets.

Do Not Do-It-Yourself

You may think it is cheaper to liquidate the company yourself. You understand your business is no longer profitable, or insolvent, and cannot grasp taking on yet another expense. However, company liquidation is a risky process. Your future depends on the process running smoothly, efficiently, and effectively. If you do not properly liquidate, it could limit your ability to start or run a business in the future. The board of directors are also held liable. An expert may tell you that once the company is liquidated, you and the board of directors are forbidden from forming, promoting, or managing a business similar to the name of your liquidated company. Do you know the laws around liquidation or what happens after company liquidation? An expert in company liquidation does know the laws and can advise you every step of the way.

Experts Are Faster

You must also successfully sell the company’s assets to recover. Liquidating assets is an extensive and lengthy process. However, an insolvency expert can help steer the company in the right direction by selling off assets at a much faster rate. The longer it takes the company to pay off its debts, the more debt will accrue. For example, if a creditor is demanding payment, they may tack on extra late fees and higher interest rates. While you are trying to liquidate your assets, the debt continues to increase. An insolvency expert will sell the assets faster, to mitigate the growth of the company’s debts.

Fill Out Necessary Paperwork

The paperwork surrounding company liquidation is lengthy and wordy. An insolvency expert can help you fill out company liquidation paperwork. They also know how to file it properly, where to file the paperwork, and what documentation to include. It is an involved process that can quickly go wrong if you do not know what you are doing. If you want your company liquidated properly, you will hire an expert that can steer you and the company in the right direction.

Determine Your Debt

You will also want to evaluate how much outstanding debt the company owes. When you know how much outstanding debt there is, you will know what assets to sell, which assets will cover the outstanding debt, or how much outstanding debt will be left over once you liquidate. An accountant or insolvent company specialist can help you estimate how much outstanding debt the company currently owes, and how much will be projected by the time you are able to liquidate your assets. An expert will also advise you on which assets you need to liquidate to successfully repay the company’s outstanding debt. If you have a board of directors, they should be included in these decisions. Typically, a liquidator will be appointed by the board who will have the final decision-making power.

Donate to a Charity

You should not expect to get the market price or the top price when you liquidate your assets. For example, do you have large, industrial-sized machinery? Do you have company vehicles and hardware? Used industrial machines, vehicles, and electronics are marked significantly down when they are second hand. You used these products to operate your business. For example, when you buy a used car with mileage, it is much cheaper than buying a new vehicle off the lot. You have the option of donating some of these assets to charities. When you donate to one or more charities, it can provide many tax benefits. However, you should not donate without consulting with an insolvent or liquidation professional.

Invest in Your Assets

Some of your assets will liquidise at a much higher value if you refurbish or repair them. Machines that are damaged are not valuable. Hardware that is broken or tainted in anyway, often cannot be liquidated. To get the best value for your assets, you may need to invest a little more money into your assets to repair or refurbish them. You will find the cost of repair is minimal in comparison to how much it will increase the value of your asset. Do you have a property to sell? You can paint the exterior, fix the railings, and add a bit of elbow grease to fetch a better price. You cannot negotiate prices when used items are broken or inoperable. On the other hand, you can bargain when your assets have value and can be used immediately when purchased.

Related posts

The Best Place to Look For a Lawyer

Josiah Anna

FAQs About Business Lawyers

Josiah Anna

Undeniable Tips for Successfully Handling Your Personal Injury Case

Josiah Anna