What does Liquidation Mean?

How Does Liquidation Help?

How Does Liquidation Help?

How Does Liquidation Help? How could a liquidation help you?

A Liquidation could help you because it stops the clock ticking by bringing trading to a close. In doing that you are putting the company’s affairs into the hands of a Licensed Insolvency Practitioner who can act as the company’s liquidator and bring about an orderly winding up of the business.

There might be other insolvency procedures that might be available to you to rescue the company, such as an Administration. However, a notable feature of liquidation is that whilst another option might be available and indeed deemed preferable when consideration is given to the circumstances of the case and its stakeholders, there is one thing that liquidation is almost guaranteed to stop because of a cessation of trading ie. it brings the hammer down on a period of Wrongful Trading.

Wrongful Trading is set out in Section 214 of the Insolvency Act 1986. It arises when a Director ought to have concluded that the company would not avoid insolvent liquidation and he or she made the position worse for creditors, not taking every step available to them to avoid the same. If a Director is guilty of wrongful trading, he or she might be held personally liable for the loss caused by the period of wrongful trading.

As undesirable as a Liquidation might be, you cannot be guilty of Wrongful Trading if you do not engage in transactions and therefore you do not trade. An essential ingredient of Wrongful Trading is ‘trading’, without it you cannot cause a trading loss to creditors that is ‘wrongful’.

Therefore if there has been any wrongful trading the effect of liquidation is to cut it off. It might not cure the pre-existing period of wrongful trading but it will ensure that it is not extended and made any worse.

Our CEO, Elliot Green, is a Chartered Accountant and Licensed Insolvency Practitioner who is available to assist you with such matters. Advice can be obtained initially free of charge to enable the position to be assessed and hopefully set you on the right road towards a better future. Call us today on 020 3925 3613 for a free consultation without any obligation.

This post “How Does Liquidation Help?” is not legal advice and not to be relied upon as such. No liability is accepted by the author and or the author’s firm for this post. You should take legal advice on the facts of your case from a professional adviser.

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