Tips for getting out of debt legally should always include liquidation. Beating a debt-riddled company should be approached holistically and include a complete restructuring process, but all too often, business owners fear liquidation and try everything else to save the business, a lot of times failing to save the company.
Any business owner who owns a business that is suffering financially and cannot pay its debt should turn to liquidation as soon as the problems appear on the horizon. Read this article to learn more about how liquidation can come to the rescue of a company who cannot get out of debt.
How can my company get out of debt and how do I use liquidation to rescue my company? Once my company is liquidated it is dead and gone and I cannot trade any longer, is it not?
Liquidation can rescue any company with too much debt
There is a long list of reasons why it is not true that a company is dead and gone and you cannot trade any longer. Liquidation can indeed rescue any company that has too much debt. Liquidation was designed to get companies out of debt so that they can continue to trade.
Also, we live in a free economy and that means any person can own as many businesses as he or she likes, whether some are liquidated, and some are not. No penalty exists in our law that prohibits any person to own a company after liquidation. In any case, it is the company, that is its own legal entity, that is liquidated not the directors. It is the company that is deregistered after liquidation as it is its own legal person.
Company directors should beware of signing surety for the debt of the company
If a director did not sign surety for any of the debt of the company, the company will get out of debt after the liquidation and it can continue with the core business without the problems. Of course, we must do some footwork for you so that everything remains lawful and done correctly. Read here for more information on commercial law and companies.
There is also a long list of why a company will not easily get out of debt as it does not use liquidation to rescue it.
How can liquidation rescue a company?
If a company is overburdened by debt and tries to trade out, usually the owner starts to put more and more personal money into the business, ending up throwing good money after bad. Liquidation will take care of the problem much quicker and sooner by getting the company out of debt almost immediately, saving a lot of time and a lot of money.
We often hear that a business must have cash-flow to survive. That will explain why business owners pump a lot of their own money into the business thinking that that will help the cash flow, but in fact, if you look at the balance sheet, usually the cash that one pumps in during the midst of the company being in difficulty, only postpones the inevitable while it impoverishes the owner and exacerbates the problem!
Liquidation will get the company out of debt without the owner having to put in any extra money, it will rescue the business because it can continue to trade without any debt which will immediately increase the chances of success. Also, the focus of the business owner will be in the right place namely; growing the business, instead of investing time and energy into trying to whip a crippled horse to life.
Once liquidation has come to the rescue and moved the debt out of the way, the company can heal itself. However, if the business continues for too long when it should liquidate, the company will be weakened or damaged and it can grind to a halt with no solution in sight. It can be too late to liquidate a company, so rather consider the option as soon as possible.