You may be thinking about your options when things have not been going too well in your business. You may not see a valid way forward for different reasons and may need to think about closing down. In this situation, you may be considering liquidation, but what does that involve and should you opt for a particular process known as "voluntary" liquidation or something else, like a pre-pack?

What to Take into Account

Before you think about liquidation, ask yourself several questions. Do you feel that the business is financially healthy, but there are other reasons why it may no longer be viable? In situations like this, companies are often able to take advantage of a process known as "members' voluntary liquidation."

Involuntary Liquidation and Winding-up

If the company is insolvent or likely to become so soon, maybe the business cannot pay its debts when they are due. Voluntary administration may be an option here and before matters progress. However, if a third party files a winding-up petition in court because you have been unable to settle your debts with them, you may have passed this point. You might be able to fight the petition in court, but otherwise, the company may be liquidated, typically referred to as "involuntary."

Understanding Voluntary Liquidation

If you decide to pursue voluntary administration, then an independent expert will be assigned to steer the company. They'll try to negotiate with creditors to settle outstanding accounts and handle the assets most appropriately. The company will still be liquidated, but in the meantime, any actions for debt recovery must halt.

Considering a Pre-Pack

Voluntary liquidation does not automatically mean that the business (as initially conceived) must end. The essence of the business may be able to survive in a certain type of voluntary liquidation known as a "pre-pack." Here, the remaining assets could be sold to another company while the old one is liquidated. However, there are many different terms and conditions, which can be quite complex, so you will need to work with an experienced lawyer to determine your way forward.

Time Is of the Essence

In every case, it's important to take timely action before things go too far. If a creditor pursues a winding-up petition in court before you think about voluntary liquidation or a potential pre-pack, you may not be able to succeed.

Taking Urgent Action

For expert advice, talk with a knowledgeable lawyer as soon as possible. Contact a company such as Menzies Advisory to learn more.