When your company is experiencing financial difficulties, there are likely difficult choices that need to be made. There are options available to you, but how do you know which is the right choice for your company? It is vital to understand your options so that you can make the right choice for your company. Principle Insolvency is here to talk about the difference between liquidation and business restructuring so that you know when each one should be used to save your business from financial trouble.
Business Restructuring is a Lifeline for Your Business
If you are wanting to exhaust every effort to save your business, business restructuring may be the best option for you. This is a process of addressing all the financial challenges your company faces so that you can make changes to your company’s operations, financial strategies and structure. This is designed to help restore profitability and achieve lasting success.
Liquidation is the Last Resort
When a company can no longer meet its financial obligations, it will likely enter into liquidation. During this process, a liquidator will be assigned to help sell the company’s assets and generate funds to pay creditors and shareholders. This is done in a legally structured manner. Once this process is done, the company will cease to exist.
How to Make the Decision Between Restructuring & Liquidation
Knowing whether or not you need restructuring or liquidation is essential when you are facing financial hardships as a company. Here are some things to consider when making this important decision.
– Financial Distress: The first step is going to involved combing through your financial data to perform a financial assessment. When you do this, if your business’s debts are out of reach with no path to profitability, liquidation might be the play. If the financial situation seems like a temporary strain, you could explore business restructuring.
– Recovery Potential: Is there any potential for recovery? If you made some significant changes to daily operations, could improve efficiencies, and discover new streams for revenue, business restructuring could be a potential option. There are going to be drastic changes that will likely be necessary for this to work.
– Stakeholder Impact: The implications of the stakeholders should be considered as well. This will not only include shareholders, but employees and creditors as well. There are usually job losses, reduced value and asset sell offs that could have a large impact on all parties during the liquidation process. On the flip side, restructuring can possibly restore relationships and help protect jobs. Rebuilding that trust will be essential.
Insolvency Services in Auckland, Hamilton, Levin & New Zealand Wide
If you are in financial trouble as a company, you can turn to Principle Insolvency to help walk you through the options that you have moving forward. We know this can be a stressful time, and we will do everything in our power to help you make the best choice for your company. Call us today!