When to Liquidate a Company
When to Liquidate a Company
When to liquidate a company? We’ll guide you safely and confidentially through the process.
- We explore all other available options before liquidation
- Ensure you remain fully compliant and avoid prosecution
- Preparation of statutory documents
- Help completing your Statement of Affairs
- C.V.L vs M.V.L
- Schemes-of-Arrangement and Examinership
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When to Liquidate a Company
When you run your own small to medium sized business, the thought of liquidation may keep you up at night. After all, your business is your baby. You have poured countless hours into its creation. You’ve worked hard on it and endured many a sleepless night throughout its inception. Through your talent, passion and determination your enterprise has gone from being a simple idea scrawled in a notebook to a fully functioning enterprise. It’s perfectly normal to feel a personal and emotional attachment to your business. After all, its fortune and its reputation are inextricably tied to your own.
Yet, it is this very attachment that can impede your judgement when your business falls upon hard times and you can no longer afford to pay your suppliers and staff or operate fully functionally. It is at this point that you may be trading beyond your means, which can be seen as both fraudulent or reckless.
How do you know when to liquidate a company?
Liquidation is a difficult decision for any company director to make, but how do you know that it’s time to take that important step towards liquidation? We’ll go into greater detail shortly, but typically a business will go into liquidation when it has become insolvent. This means that cash flow has dried up with no foreseeable relief in future. You are unable to pay your creditors, employees and suppliers and as such your business is increasingly unable to function as usual.
That’s not to say that times of financial difficulties are the only times that companies are liquidated. Some businesses liquidate when the company has run its natural course, met all of its specific operational goals or when its director retires.
However, even when you know that now is the right time to liquidate your company, you know that going it alone can do more harm than good. Irish insolvency law is a very complex field and there have been numerous legislative changes in the last 10 years alone. You need the help of a firm with years of experience in business insolvency. A firm that understands the challenges and anxieties faced by owners of SMEs in this challenging time.
You need Russell & Co.
We are highly skilled and highly experienced in all aspects of liquidation. We have been appointed as liquidator to numerous Irish companies over the years. Partner John Russell holds an Insolvency Practicing Certificate from Chartered Accountants Ireland and our firm can assist your business in all aspects of corporate insolvency and restructuring. We can guide you through each step of this potentially complicated process to help you remain compliant while also doing right by your shareholders and creditors. If you’re unsure when to liquidate a company we can give you honest, confidential and practical advice. With our assistance you can take decisive action for the good of your enterprise emerge on the other side, ready to face the challenges of tomorrow.
How Russell & Co. can help your business
Even when undertaken voluntarily, liquidation can be a highly intimidating prospect when you’re undertaking it alone. Here are some of the ways in which we can help your business in the event of insolvency…
- We advise you on your statutory obligations to ensure the process is fully compliant. In light of the high volume of legislative changes to Irish insolvency law over the past decade or so this is actually harder than you may think.
- We prepare all statutory documents on your behalf and ensure full compliance with Irish legislation.
- In the case of Creditors Voluntary Liquidation, we can assist you to assemble and calculate your Statement of Affairs in line with the 2014 Companies Act.
- For Members Voluntary Liquidation, we provide advance tax advice prior to commencement of liquidation, so you know you can liquidate your assets in the most tax-efficient way possible.
- We can organise, schedule and facilitate all obligatory meetings. We will also deal with your suppliers, creditors and employees.
- We offer a Fixed Fee approach with no unexpected fees. This is completely comprehensive and includes all costs such as advertising, filing fees, and legal costs. We understand how financially delicate this time can be for businesses and that’s why we will never leave you with any unexpected costs or extra fees.
- We also offer ‘pre-liquidation’ advice in cases where a viable business may be salvaged or saved. We can advise on both scheme-of-arrangement or examinership which are useful tools in saving a viable enterprise.
When to liquidate a company: Practical examples
Of course, it’s one thing to know that you should pursue voluntary liquidation when your business faces insolvency, but another altogether to know when your business has become insolvent. Knowing when to liquidate a company in theory is different to knowing in practice. With this in mind, let’s take a look at some common indicators that your SME has become, or is becoming insolvent…
You’re making sales but not profits
Your business can look perfectly healthy in terms of how much inventory you’re selling, but your margins are so low that you’re consistently failing to turn a profit. Throwing a quick sale and taking a hit on your margins is fine if you’re trying to shift large quantities of stock that refuses to budge. However, undercutting your competitors on price and scraping by on low profit margins is not a sustainable business model. It’s a recipe for an impeded cash flow, and may result in…
Defaulting on your bills
Many businesses and individuals alike miss the odd payment or are late paying a bill here and there. However, when you find that your business regularly misses payments this can place a strong hold on your cash flow. With each missed payment comes a penalty and while these may be easy to overcome individually, when they add up they can place an increasingly problematic drain on your profits.
You’re putting your own money into the company
When your business is struggling, you may feel that if you lend it some of your own money, you can help it to weather the financial storm. While this may be noble in its intentions, it is virtually always a recipe for disaster. Not only does lending money to your own business represent legally shaky ground, if your business goes under you may not recover the personal loss you have made.
If you constantly find yourself in a situation where you have to use your own money to bail out your business, it may be far more cost efficient in the long term to liquidate. It is essential that you are running a viable business before investing any further funds.
You’re consistently making losses
Sometimes in business you have loss leaders which pay off in the long term. Plus, every now and then you may encounter a loss in a given month or quarter due to flagging seasonal demand or perhaps a new competitor on the scene. Nonetheless, while some short term losses are usually acceptable, consistent losses should set alarm bells ringing. While you may feel the need to behave like a Captain solemnly going down with your ship, it’s important to grasp the nettle and pursue liquidation before your creditors get the courts to do it for you.
Your books are a disaster
Poor bookkeeping and accounting are simply not sustainable in business. While some SMEs are more “on it” with their business records than others, sloppy records are almost always an indicator that all is not well with a business’ finances. Warning: It is an indictable offence to fail to keep proper books and records.
Fortunately, we offer a suite of accounting services to help you to right the ship and take control of your business finances. When all of your incoming and outgoing funds have been accounted for you will be in a much better position to decide whether or not you should liquidate your business’ assets.
It’s getting harder to get credit from your bank
A deterioration of your relationship with your bank or lender is another key indicator that your business may be in, or approaching, insolvency. Banks have their own ways of determining the viability and profitability of their business clients. As such, they may be positioned to determine when something is awry before you are aware of it. If they no longer extend you the same credit that they used to, this may be a troubling sign.
Penalties of Compulsory Liquidation
If you notice the above signs apply to you, it’s important to act on them, lest you face Compulsory Liquidation. This can be a very costly process, not least because you may be appointed an expensive liquidator by the courts if they do not allow you to nominate your own liquidator.
You also need to be aware that if you have acted dishonestly, fraudulently or recklessly you can be restricted or disqualified from acting as a Director in the future, and worse still, you can be held personally liable for all the debts of the company.
Don’t wait. Get in touch today
If all the signs point to the unavoidable truth that your business is in insolvency, timing is of the essence. If you’re unsure when to liquidate a company, but sense that a storm is brewing, Compulsory Liquidation could be closer than you think. Don’t delay, get in touch with us today to arrange a free consultation. We have the knowledge, skills, experience and dedication to help ensure that your liquidation is to your long term benefit.
Liquidation is a serious challenge, to be sure. Yet, it is far from insurmountable. Once you have emerged on the other side we can help by providing a comprehensive suite of accounting and business coaching services to help you to learn from the past and take a bold step forward into the future.
WOULD YOU LIKE SOME EXPERT HELP?
Russell & Co. can advise you on the best steps to take for your business whether it be liquidation or otherwise. You may also find the following pages of interest; liquidation accounting & insolvency explained.