Closure brings Closure


Is closure always a bad thing?

Yes, we’ve all had lovely nights out ruined by the bell ringing signifying the end of the end of fun at that particular location, and one of the saddest things about enjoying a great book is that ultimately you will have to turn over the final page – but this also gives you the chance to begin another reading journey.

Think about run down industrial factories that are covered in weeds, broken windows and attract vandals (and worse) – wouldn’t closure and demolition be the first step in the rebirth of a new business success story?

In a lot of circumstances – closure can not only be beneficial but the best thing that could happen under the circumstances.

One example where this is very much the case can be with businesses.

Let’s assume a business has run up unsustainable debts during the pandemic and lockdowns just to keep operating and now those repayments have come due.

The directors find they cannot make the minimum repayments on all their liabilities, only some of them, and are going to default then they have an insoluble problem.

They will have to dedicate so much available energy and bandwidth into trying to solve these issues that might not be solvable, rather than dedicating their time and resources into the most important task – running a business or coming up with a plan that can make it profitable if it isn’t.

Running a Business

At this stage, the benefits of an orderly, planned closure start to become apparent.

The first positive is that any limited company that has outstanding debt is legally allowed to close down – and that the outstanding debt will also disappear if the company closes using a specific liquidation procedure.

This closure stops the debt following directors as they move onto their next venture and also helps bring closure to creditors’ unrealistic hopes of receiving 100% of owed debts which is unlikely to happen.

What they would receive is some funds from the sale of company assets which would be shared out amongst creditors. They would then be able to move onto their next move without holding out or spending time on chasing debts that would never be fully repaid.

The most common method used to close is the Creditors Voluntary Liquidation (CVL) with over 90% of corporate insolvencies in the past year being CVLs.

In a CVL process, a licensed insolvency practitioner oversees everything including liaising with creditors from their appointment and will manage all correspondence until the process is completed.

If there are no unforeseen circumstances then the process can be completed within two weeks of the date of the initial meeting to final shareholders and creditors meetings which will see the business formally placed into liquidation and closed.

Solvent businesses can also close if they choose to but will use a different process called a Members Voluntary Liquidation (MVL). If a business can clear its debts within a 12 month period it will be allowed to proceed and use the tax advantages it brings to directors.

It’s quite something that when disciplines as different as art, science and religion all come to the same conclusion and recognise the importance of closure then there is something there.

The wisdom applies to businesses too.

Directors and creditors will benefit from taking the decision and seeing it through and the best thing they can do is to get some advice from experts – especially BusinessRescueExpert!

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