A businessman needs to understand the advantages of the liquidation to take the right decisions, when it matters the most. Aimstorm Solutions is among the top UAE based companies, offering the liquidation services. Liquidation is the process that facilitates the shutting down of a company. It also allows apportioning of the assets via litigation or agreement.
Types of liquidation
Creditors Voluntary Liquidation (CVL):
It’s the most common form of liquidation. It happens when a company fails to pay the debts and the creditors are involved in the liquidation process.
The company is no longer able to repay the debts, or there is significant delay in payments. Thus, an application is moved in the court for liquidation.
Members’ Voluntary Liquidation (MVL)
The company has managed to settle the debts currently, however the directors still want to close it. In such condition, MVL is applicable .
But all subsequent liquidation costs will be met through sale of company assets. Thus, in these conditions liquidation is a cost-effective option.
And the insolvency practitioner will administer restructuring or redundancy costs, if any. The insolvency practitioner will have the right for staff redundancy and the associated payments. He will also have the authority to cancel any leases or other long-term liabilities. However, if you have given the personal guarantee or drawn the director’s loans, then you’ll be responsible directly for any such payments or else, it would be paid collectively by you and your shareholders.
Advantages of liquidation:-
Minimizes debt repayment:
The biggest advantage of liquidation is your debts will be written off, barring some special circumstances. The company owner needs to cover the cost of the company’s statement of affairs and creditors meeting.
prevention of further payments
The process minimizes your debt repayments you’ve accrued till date. Also, you can prevent any further going payments. When you liquidate your company, any lease or purchase or hire agreements stand terminated. Clearly, you’ll not be liable for any subsequent payments comprising original arrangements before liquidation. In case, you owe arrears to leasing company creditors,
they are allowed to claim the said amount in question, back from the insolvency partners, you’ve appointed
Staff may claim redundancy payments
The staff is eligible for redundancy payments including pending wages, and other outstanding dues. As said already, the insolvency partners will take initiative in making the staff redundant. The redundancy payments will be settled using the proceeds from the sale of company’s assets. If the total amount is not enough to settle all redundancy dues, the employees may approach to the Government authorities.
Ends the legal actions
When a business owner enters in liquidation, it enables him to bring an end to the prospects of legal actions. However the condition would be different, if you’ve some form of personal liability for company debt. Otherwise, the creditors will not be able to initiate any legal proceedings. Liquidation offers the opportunity to show that your company was closed down voluntarily, and it was not forced to shut down due to creditors’ petitions in the court
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