Company directors fear liquidation, but often, voluntary liquidation presents the most beneficial financial option in the long run. If your company is insolvent, making the decision to liquidate can relieve stress, reduce your potential personal liabilities as director and neatly wrap up the company’s operations, leaving you free to start afresh.
Voluntary liquidation happens when an insolvent company chooses to cease operating rather than being forced to by its creditors. The main benefit of going into voluntary liquidation is that you get to choose your liquidator. Also, voluntary liquidation is a simpler process, meaning that your case can start immediately and be completed within a shorter amount of time. Involuntary liquidation (otherwise known as a court liquidation), on the other hand, can take a lot longer to finalise and can involve a number of court appearances with creditors.
Company directors need to be constantly aware of their company’s solvency. Australian Company Liquidations share their three major warning signs which indicate your company may be headed towards insolvency.
If you are finding that your company has been suffering from a fairly consistent shortage of cash flow, then your company may be heading towards insolvency.
Poor financial metrics are another reason many companies are going into voluntary liquidation. A lack of profits can also mean that the company is heading towards insolvency or has already become insolvent.
One of the main reasons that voluntary liquidation has become so prevalent is that business owners are often focusing on the symptoms and not seeking out the cause of their financial distress. Focusing on the next ‘big job’ may ease the pressure in the short time, but ignoring the larger picture means that it is often too late to fix the situation when it becomes more apparent. In order to avoid insolvency, businesses need to be proactive rather than reactive.
By choosing voluntary liquidation, you are essentially placing the stress of dealing with an insolvent company in the hands of the liquidators. Your appointed liquidator will become the point of contact for all creditors and will deal with selling your assets and distributing the funds to creditors, leaving you debt and stress free!
If you think your company has reached the point where voluntary liquidation is your most viable outcome, give Australian Company Liquidations a call on 1800 981 070.