It can be a difficult situation when a company is failing insolvency. When this happens, liquidation is often the last step in the process that ties up all the loose ends of the ordeal. During the liquidation of a company, there are going to be several steps to the process that include dismantling the business legally, taking care of the outstanding debts, and redistributing the assets. Principle Insolvency is here to talk about what the process looks like when a company is insolvency and enters into liquidation.
The Liquidation Process of an Insolvent Company
When a company isn’t able to meet its financial obligations any longer, liquidation is often where the business is headed. This is what the steps in this process look like:
– Decide to Liquidate: The first step in the process is actually making the decision to liquidate. This can be a voluntary process in which the shareholders see the problem and move voluntarily into liquidation. However, there are situations where the court will order liquidation because creditors or other interested parties have initiated it.
– Appoint a Liquidator: A licensed insolvency practitioner is often appointed to assist in the liquidation at this point. They will oversee the entire process which include taking over the company’s assets, investigating financial records, and ensuring creditors are paid.
– Investigate Financial Records: A close look will be taken into the debts of the company, wrongful trading, mismanagement, or illegal actions that have been taken by directors. There may be legal actions taken against individuals if necessary.
– Asset Realisation: The liquidator will then start working on selling all assets that the company has to help pay creditors. This might be properties, inventories and equipment that can be sold for a profit.
– Creditor Payment Distribution: The creditors are sorted into different categories of secured, preferential, and unsecured groups. Secured creditors would be banks, preferential creditors would be employees, and unsecured creditors would be all those that are left that money is owed.
– Deregistration of the Company: When the obligations have been made to all the creditors, the liquidator will then deregister the company from the Companies Register. This will be the end for that business officially.
Other Considerations of Liquidation
There are several different groups of people and organizations to consider in liquidation. Here are some of the others impacted:
– Directors: These people are legally obligated to cooperate with liquidators
– Employees: Employment is often terminated in the case of liquidation
– Tax Obligations: All tax liabilities are treated as debts during liquidation
– Timing: This can be a lengthy process depending on the extent of the company’s finances.
Insolvency Services in Auckland, Hamilton, Levin & New Zealand Wide
If your company is in trouble and you are looking for guidance through the liquidation process, you can turn to Principle Insolvency to help you navigate the process and get the ball rolling. We will make sure it is all taken care of legally and all parties are taken care of. Call us today!