The Advantages of Liquidating a Limited Company

Liquidation advantages

There are advantages to liquidating a limited company if it is struggling under the weight of debt it can’t afford, but there are also disadvantages.

Liquidating a company may seem daunting and it is usually the last resort of any director, but when you cannot pay your creditors and you have exhausted all other options, there are advantages to consider taking this route which we outline below…

1. Eradicates the debt

The liquidation will write off the company debts once the assets have been sold off and whatever monies are raised are used to clear as much of the company’s outstanding debt as possible.

In most cases, some creditors will have to accept a loss; they won’t be happy, but it will be a weight off your mind.

2. Eases the pressure

Although the liquidation process is difficult, you will not be undertaking it – the liquidators will, so this gives you time to breathe and take stock.

If you want to start a new business you can get on with it and get back to asking investors to work towards a new successful business rather than paying off debt.

3. Employees get paid redundancy

The cost of redundancies and restructuring do not apply as the company does not have the money to pay it.  Another bonus is that the redundancies will be made by the liquidator, it may not eradicate bad feeling but it’s not your decision.

Also employees will be paid redundancy, even if there aren’t enough assets to cover the cost, this payment comes from the government. Directors of the company are also able to claim for redundancy pay; the average claim is currently around £9,000. Read our recent blog post here.

4. It may not cost you anything

The initial cost of preparing the Statement of Affairs is usually relatively low and the remaining costs are taken from the sale of the company’s assets, so it won’t cost much for all the work to be done for you. And, as outlined above you may be able to claim for redundancy and this can be used towards liquidation costs.

Get free liquidation advice today

We hope this article has helped explain the advantages of liquidating a limited company. If you have spent a long time considering the liquidation process and all it entails, hopefully these pointers will guide you as to whether it is the right thing for your company.

For some free no-obligation advice on whether liquidation is right for your company just call us for free on 0800 975 0380 today or email us on [email protected]