The Accountancy | Accountancy for Insolvency and Liquidation - The Accountancy Network

Insolvency and Liquidation

No matter how hard you try to make sure that your business is a success, for some these dreams simply cannot become a reality. Profit can disappear and money can become a real problem, but it is important to remember that you are not alone.

In these instances, companies may go into liquidation or administration. Both of these are formal insolvency procedures for businesses throughout the UK, but they do have differences.

What is liquidation?

Liquidation refers to a company that has ceased to trade. All of their assets are turned into cash and it is seen as the process used when a company is going to be closed down.

There are three main varieties of liquidation process:

  • Creditors Voluntary Liquidation
  • Compulsory Liquidation
  • Member’s Voluntary Liquidation

The first two processes relate to an insolvent company, whereas the MVL is used when a solvent company no longer has a purpose.


What is administration?

Liquidation isn't the only route to take for a business facing insolvency. Administration can also be a viable consideration, especially if there could be a future for the business with a reliable cash flow.

Administration is usually used as a way to protect a company and the assets that it has from some of the more aggressive creditors.

Administration is the preferred method for many businesses as it means that you risk less unemployment and also can live to trade another day.

If you believe that your company could be facing insolvency due to financial issues, then it is important not to bury your head in the sand. Instead you should approach an experienced and professional accountancy firm will be able to give you the right advice, guidance and help that you need at this difficult time.

Dealing with a declining cash flow early on can really increase the choices that you have and may even mean that you can continue to trade, trying to get your business back on track.

Early detection is vital, so speak to an expert and take your business from deep in the red to back in the black.