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HomeFinance and AccountingInsolvencyCan a company avoid liquidation?

Can a company avoid liquidation?

a company liquidation
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Liquidation is essentially a death sentence for companies. Once the process has been enacted, there’s no going back, for better or for worse. While you’re likely worried that liquidation is inevitable for your company should you be facing serious financial issues. You’ll be pleased to hear that there are a range of alternative solutions. Here, we explore how companies can potentially avoid being liquidated, from arranging with creditors to selling off non-essential assets.

Creditor negotiations

Creditors will typically only force you into liquidation if they have no confidence that they’re going to get their money back. 

Ultimately, it’s not the best situation for them either – they probably won’t get all of their cash back and will lose a potentially valuable client. 

If you believe that there’s a way your business can return to a state of fiscal well-being, then speak with the creditors. If you can persuade them that you have a well-thought-out plan. They’re likely going to be more keen on that than liquidation. 

By seeking advice from a team of experts, you can get to the bottom of your financial issues and come to the negotiations as prepared as possible. 

Refinancing debts

Another potential way out is to refinance your debts. If you have a creditor who’s in a rush, but you reckon it’s highly probable that you can return to a good position financially in the long run. Then you may be able to essentially transfer your loans.

This will depend on how stable your business appears to be, and on the kinds of stipulations that the new creditors have. They may want to put the company into receivership, for example, which might not quite be the perfect solution.

Sell off non-vital assets

If you have a particular creditor who you need to pay back as soon as possible, and you have assets that aren’t essential for the operation of your business (such as a second office or spare fleet of cars) then you could consider selling those assets to repay the debt.

While this might buy you a little more time if your business is struggling more generally. It’s worth thinking about whether this approach is an effective long-term strategy.

Bringing in new management

In some cases, it might not be the business itself that your creditors don’t have confidence in, but rather the management. If this is the case, then it’s worth considering whether bringing in new, experienced professionals could be a viable solution. 

In addition to calming the fears of your creditors, it could also be the practical change your company needs to return to a state of profitability. 

There are plenty of ways that a company can avoid liquidation, but most of them require that you act fast. Especially in the current financial climate, creditors are often highly concerned that they get a return on their investments. And can pull the plug at a second’s notice. 

If you suspect that you could be facing liquidation imminently. You must seek expert advice as soon as possible to start looking for other solutions.

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