Advantages of liquidation - Liquidation Advice Centre

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Advantages of liquidation

Even though liquidation is often viewed as a negative process, there are some advantages too.

These include:

  • Your debts are paid off or written off including tax liabilities
  • As a Director you minimise the risk of wrongful trading
  • Entering the process stops your Creditors demanding to be paid
  • Your are taking action, so try and relax you are doing all you can
  • Liquidation is happening to the company and not the individuals
  • Your creditors can claim the VAT back on the debt that they are owed
  • The process is managed by a qualified liquidator
  • Once the process is over, the Creditors can take no further action against you
  • Once the company closes all legal action against the company is stopped
  • If you enter compulsory liquidation, there are no costs as the petitioning creditor pays them
  • Once the process is over you are free to get on with your life again
  • You are free to open another business
  • The process allows you to restructure your business and trade better and smarter in the future

As Members Liquidation is a voluntary process for solvent companies this process has some extra advantages, which include:

  • Its quick –the whole process can be resolved within 12 months
  • There are tax benefits
  • The company is officially ended
  • All creditors are paid off
  • There are often funds left to be distributed between the shareholders.
  • There is an option to rescue and turn around the business

It is also important to consider the disadvantages of liquation and the alternatives to liquidation before you decide to enter a liquidation process.

The disadvantages of liquidation

  • If you want any of the assets you have to buy them
  • If you want to keep trading you will need to open a new company
  • If your businesses keep going into liquidation, people will loose trust in you and your business
  • You will be investigated by the liquidator and this may lead to action being taken against you

The consequences of liquidation

Going through an insolvency process can be very stressful particularly for Directors. If you are a Director of a business you need to understand that following liquidation you will be restricted from being involved in a business of the same name for 5 years. You can of course be a Director of a new business with a different name as long as you have not been disqualified for misconduct or made personally bankrupt.


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