There are numerous reasons why a business might fail we don't need to go into each of those. When a business faces financial difficulties there are lots of options available to the directors and shareholders.
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W hat Is Voluntary Liquidation And W hat
Does It Mean For Y our Business?
Morbid as it sounds, Voluntary liquidation is like euthanasia – when all
attempts to heal the business fails, the board of directors might opt to
voluntarily liquidate (shut down) the business
by appointing a 'administrator' to oversea the
process. They quite literally “pull the plug” on
There are numerous reasons why a business
might fail we don't need to go into each of those.
faces financial difficulties there are lots of options
available to the directors and shareholders. The easiest options are selected
first and later the more difficult ones. Sometimes these options don't help at
all or reason for continuation of business cease to exist. For example, if the
business is depended on say mining rights for a certain rare mineral and
those rights were either taken away or the mineral was exhausted. There
might be a million other reasons why a business cannot continue ranging
from financial to material supply issues to market related issues. These days
war is an added factor and can spell doom and force a business to opt for
Whatever the cause, there are two types of liquidation – Corporate
Insolvency Balmain and involuntary. The latter usually happens when the
creditors approach the courts usually due to non-payment of their dues. The
court goes into the merits of the case and appoints a administrator to
investigate and oversea the liquidation process.
When the board of directors decide to shut down or liquidate the business,
they hunt for a liquidator (officially called the 'Administrator'). In Australia,
experienced and highly proficient administrators are available with
accounting service providers such DCL Advisory
( http://www.voluntaryadministrationexperts.com.au. ).
When an experienced and highly proficient administrator is found he is
officially appointed (via a board resolution), as the administrator.
In lay terms, the administrator usually begins by investigating the reasons
for the business failure and if he finds that there were financial or other
irregularities, he is duty bound to inform the authorities. In either case, he
proceeds to stage two which is to evaluate the assets available for disposal
and also debtors. Once those are catalogued along with their current market
value, he will catalogue all employees and their dues and also all secured
creditors and amounts due to them.
Stage three is when he weighs-in whatever resources are available against
what needs to paid out. If
there is a short-fall, he
will call a meeting and
agreement from those
who are due to be paid,
to accept a reduced amount in full settlement of their dues.
Stage four is usually the sale all assets at best prices available and also
attempt recovery of monies owed to the business by the debtors. Stage five is
the distribution process and stage six is the final dissolution of the business.
Of course, except for the final dissolution which happens only at the end, all
these other steps need not be in the same sequence and the administrator is
free to choose how he goes about the process and may even opt to combine
one or more steps or run several of them simultaneously.
Broadly however, Business Insolvency Sydney is an investigation into the
reason for the failure followed by selling of the assets owned by the company,
followed by distribution of the proceeds of the sale and then the final legal
dissolution of the company.