On one hand, company liquidation definitely comes with some advantages, especially when it comes to your current situation.
Leases are cancelled
Terms on lease and hire purchase agreements are generally terminated at the date of liquidation, meaning that no further payments need to be made. If any arrears are owed, the company leasing the goods may be able to claim from the insolvency practitioners along with other creditors. It is worth noting here that personal guarantees are often given upon signing a property lease agreement; you should check your documentation carefully so you know whether you are likely to be made personally responsible for the remainder of the lease.
Avoid court processes
By voluntarily choosing to liquidate the company, you can avoid being petitioned through the courts and be able to demonstrate to the public that liquidation was a company choice rather than a result of hostile creditor action.
Staff can claim redundancy pay
Members of staff will be made redundant by the liquidator, and if eligible, they can start their claim for redundancy pay and other statutory entitlements. If monies realized from the sale of company assets are not sufficient to cover redundancy payments, staff have an alternative route by which to claim what is owed. The National Insurance Trust Fund(NSITF) pays out for redundancy, unpaid wages and holiday pay should the company not be able to do so using its own funds.
Legal action is halted
Any legal action against the company is stopped when the company is in liquidation. Again, as long as you have no personal liability for a company debt, creditors will be unable to take action against you.
Having identified some of the advantages of this type of liquidation, let us now look at the main disadvantages of the process.
Personal liability for debts
Becoming personally liable for company debts can happen if a director has made a personal guarantee against debts of the business. A creditor can enforce the debt if they are unable to reach an agreement for repayment.
If it comes to light that the company has been liquidated quickly, with the sole purpose of avoiding debt repayment, directors may be held personally liable for company debts due to their improper actions.
All assets will be sold
All existing assets will be sold off in order to provide a dividend to creditors where possible, and for the insolvency practitioner to collect their fee.
Staff will be made redundant
As liquidation bring about the end of a company, any staff employed by the business will be made redundant and be forced to look for employment elsewhere. However, depending on their length of service with the business, they may be able to claim statutory redundancy pay following their dismissal.