If your company is about to go bankrupt, and you have tried researching UK business bankruptcy on your own, then you may be a little bit confused. In fact, you may have had a hard time finding any information at all. That’s because in UK law, there is no such thing as business bankruptcy. The two options for a business are liquidation and insolvency. Bankruptcy is only an option for individuals. That being said, we are going to take a brief look at the various options that are available to you, weighing the pros and cons of each. That way, you can make a well informed decision about what is in your best financial interest.
As we mentioned a moment ago, one of the two options available to you when your business is going under is liquidation. The liquidation option is further divided into two different types. One type of liquidation is voluntary, and the other is compulsory. In a voluntary liquidation, you take the initiative. With the assistance of an insolvency practitioner, you liquidate your company. In a compulsory liquidation, you creditors initiate the process of liquidating your company by petitioning the court. Believe it or not, each of these options has both advantages and disadvantages, and it is in that direction that we will now turn our attention.
Pros and Cons
You might think that a compulsory liquidation does not have any advantages, but it does have at least one. The chief advantage of a compulsory liquidation is that it does not cost you anything, because your creditors have to pay all of its associated legal fees. Of course, it also has a pretty significant disadvantage, namely the fact that you have absolutely no control over the process. By contrast, in a voluntary liquidation you have the aforementioned assistance of an insolvency practitioner. Of course, you have to pay for that assistance, and the insolvency practitioner is required by law to look after the interests of your creditors.
Your Other Option
Your other option is a company voluntary agreement. This is exactly what it sounds like. It is an individual voluntary agreement for companies. In case you are unfamiliar with these types of agreements, we will define them for you. In essence, they are agreements between people (or businesses) that owe money and the people (or businesses) to whom that money is owed. Under the terms of such an agreement, the debtor is given a period of time (usually three years) in which to repay the debt in a series of installments. These agreements are legally enforced by the court system, and often include reductions in the amounts of the debts.
Making the Choices
We are using the plural form of the word choices here because you have more choices to make besides whether to pursue insolvency or a CVA. You also have to decide which type of either option to pursue. A competent attorney can be of tremendous help to you in analyzing your situation and offering advice regarding which course of action would be best for you to take.