UK businesses have not fared well since the recession unleashed its wrath on the unsuspecting economy, which is still struggling to stand on its own two feet.
The repercussions of the credit crunch are far-reaching, and are responsible for the demise of all sorts of companies, from Woolworths to HMV.
The unstable economy has claimed many victims during its theatrical demise, and with the news that the UK has been stripped of its coveted AAA rating and the sterling’s progressively weak fight against the dollar and the euro, things are not looking too good.
Sometimes, an insolvent liquidation may be the only suitable way forward for a company. Also known as winding up or dissolution, this involves bringing a company, or part of that company, to an end and re-distributing the assets and property of the firm in question.
If this is the only path that can be pursued, speaking to insolvency experts who have considerable experience acting as liquidators of companies ranging from multinational groups to stand-alone managed businesses may be worth consideration.
What are the alternatives?
However, an insolvent liquidation should only be considered when all other avenues have been exhausted.
A company administration may be preferable if this is a viable option, since the process can be used as part of restructuring a business, enabling it to buy time to deal with any difficulties which may be hindering its ability to move forward.
Administration is a legal process that requires the appointment of a licensed insolvency practitioner as an administrator. Acting as an alternative to liquidation, it functions as a rescue mechanism for insolvent entities, allowing them to continue running their business.
All options short of liquidation are taken into consideration, including recapitalising the business, selling the business to new owners or demerging it into elements that can be sold and then closing the remainder.
Another benefit of going into administration is that while the order is in place, the company is shrouded in a protective cloak which prevents creditors from taking action against the company without leave of the Court.
Following the introduction of the Enterprise Act 2002 and the consequent simplification of appointing administrators, company administration has become the most common form of insolvency in the UK.
Other insolvency procedures which you may want to mull over include Corporate Voluntary Arrangements (CVAs), receiverships and LPA receiverships.