22:36
Faizan
Having a company undergo liquidation can be one of the most difficult times in a businessperson's life. It signals the final chapter in that particular book, and though it leaves room open for a sequel, the feelings that come along with a liquidation are devastating. Those feelings are often made worse by the sometimes overly technical and opaque methods used to liquidate your business. Often, simply having a sense of what's happening to your company is all that's required in order to feel less anxious about the process. One of the most commonly misunderstood aspects of liquidation is the order in which assets are distributed during the liquidation process. As such, we've decided to put together this short guide in an effort to clear the fog and ease your mind.
When your company is liquidated, assuming it was done so because of insolvency, the assets which make up your business (including stock, property, and intellectual property and so on) will be sold or distributed in a set order, laid down in law and carried out by a licensed insolvency practitioner. That order is as follows:
- First, any individual or organisation holding a fixed charge over the company's assets will be paid out of the sale proceedings once the cost of realisation (the admin charges) have been paid.
- If there is any money left after paying off the first group, the second group to be paid will be so-called preferential creditors. 'Preferential creditors' will typically comprise employees, who will be claiming unpaid wages, accrued holiday pay and their pensions. These people will then be paid within a specified time period.
- If there is a floating charge on your business then a proportion of any remaining funds (up to £600,000) will be made available for unsecured creditors.
- Next, any creditor with a floating charge will be paid from the pot.
- Finally, the rest of the funds will be distributed amongst the shareholders in the business. At this stage, it is very unlikely that any money will be left, as debt repayment is the primary objective of liquidation.
With that, any and all money within your business will have been distributed and your business struck off the register at company's house. As a director, you will be unable to start a business with the same or similar name either, unless a judge deems it acceptable for you to do so.
When your company is liquidated, assuming it was done so because of insolvency, the assets which make up your business (including stock, property, and intellectual property and so on) will be sold or distributed in a set order, laid down in law and carried out by a licensed insolvency practitioner. That order is as follows:
- First, any individual or organisation holding a fixed charge over the company's assets will be paid out of the sale proceedings once the cost of realisation (the admin charges) have been paid.
- If there is any money left after paying off the first group, the second group to be paid will be so-called preferential creditors. 'Preferential creditors' will typically comprise employees, who will be claiming unpaid wages, accrued holiday pay and their pensions. These people will then be paid within a specified time period.
- If there is a floating charge on your business then a proportion of any remaining funds (up to £600,000) will be made available for unsecured creditors.
- Next, any creditor with a floating charge will be paid from the pot.
- Finally, the rest of the funds will be distributed amongst the shareholders in the business. At this stage, it is very unlikely that any money will be left, as debt repayment is the primary objective of liquidation.
With that, any and all money within your business will have been distributed and your business struck off the register at company's house. As a director, you will be unable to start a business with the same or similar name either, unless a judge deems it acceptable for you to do so.
Posted in: business
