As a business owner, it is important to understand the difference between liquidation and restructuring to help you make an informed decision when your business is struggling. If your business is in trouble, it often leaves owners with a difficult decision to make. Deciding whether or not to liquidate or restructure isn’t a decision to take lightly. They both have their own challenges. It is important to know what each of these decisions have in store so that you can make the right one. Principle Insolvency is here to talk about liquidation and restructuring so that you know which one will benefit your business and all parties involved the most.
How Liquidation & Restructuring are Different
It is vital that business owners know the difference between liquidation and restructuring your business so that you can make an informed decision when faced with the decision.
– Restructuring: If a company is trying to turn things around and give it one more go, they will turn to restructuring their business. When this is chosen, there will be significant changes made such as operations, structure and financial strategies. The goal is always to become profitable again and aim for long-term viability.
– Liquidation: When a company is liquidated, it is the last resort. The company can no longer reach the financial obligations it has. A liquidator will be assigned to sell off assets and generate funds. The funds from this will be distributed to shareholders and creditors. This is done in a legal and structured manner.
How to Determine Which One is Best for Your Business
The decision between liquidation and restructuring isn’t one that should be made on a whim. There are a few things that need to be considered first.
– Financial Distress: It is important that you evaluate the financial distress of the business. This financial assessment should be done first thing and will help you see if there is a possible pathway to viability.
– Recovery Potential: Another thing to consider is whether or not there is any clear path to recovery for your business. You need to know if you can pivot operations, find new ways to generate revenue, and improve the efficiencies that have gotten you here.
– Liabilities & Stakeholder Impact: You need to think about the shareholders, employees and creditors and the implications that either path will have on them. In liquidation, assets will be sold at lower values and will lead to job loss for many. Restructuring could help build bridges and turn things around to rebuild trust within the market.
Insolvency Services in Auckland, Hamilton, Levin & New Zealand Wide
If your company is in serious trouble, this is the best time to do a financial evaluation to make the decision to either restructure or liquidate. If you are struggling with what would be the best option, you can turn to Principle Insolvency to help you. We will walk you through your options as you make this important decision. Call us today!