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What is the Difference between Company Liquidation and Administration?

Nowadays as many businesses find themselves in financial turmoil, they seek professional assistance.Many businesses are seeking professional assistance nowadays as they find themselves in financial turmoil. Several wordsFigures and industry jargon are thrown at them as they are told their options, but for one who is not typically familiar with insolvency lingoterminology, this may can be all too overwhelming and may lead them toto them making the wrong decision. It is increasingly important to understand not only what your options are, but also what they will do to serve the best interests of you and your company.

When a company encounters irreparable financial distress there are essentially two options:

1) Liquidation
2) Voluntary Administration

Liquidation refers to the cessation of a company’s operations and the sale of its assets to pay outstanding debts to creditors. It can initiate be initiated on either a voluntary or involuntary basisterms. In an involuntary situation, a creditor may file a petition open a case with the courts when the debtor company fails to pay outstanding debts that exceed $2000. If the court accepts this applicationis proposal is approved, a liquidator is then appointed to the company to ensure the debts are repaid (subject to sufficient assets being available). However, often businesses may recognise the advantages and It often happens that a company will voluntarily apply for liquidation to avoid the stress of a court caseencounters. This is one of the final options a business company’s directors should consider, as the business company will be terminated de-registered and cease to exist following the completion of the liquidation process.

Voluntary administration, on the other hand, presents a more flexible option for a business company when it becomesthey are insolvent or is likely to become insolvent. This Unlike liquidation, it provides company directors with the opportunity to restructure the business and/or settle its debts, without affecting the its ability of the business to trade in the future, unlike liquidation. An external administrator is appointed to the business, and is put in charge of investigating the company’s affairs, reporting to creditors and assistings in determining whethethe most appropriate course of action the company should take to settlerectify its debts.

Therefore, Tthe two major differences between liquidation and voluntary administration lay in the level of control held by the company director and the future of the business. Owing to the benefit of allowing businesses companies to resume practise tradingfollowing the completion of liquidation processes, voluntary administration is regarded as the best option for businesses who are facing insolvency and whose restructuring will prove worthwhile; whereas. Ffor businesses companies who have reached a point of no return, liquidation is recommended.

For more information about a company liquidation or a voluntary administration, or to find out how we CRS can help you out of your financial turmoil, contact 1800 003 883 1800 210 073 for free and no-obligation advice. We offer free advice 7 days a week.

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