Sometimes a business needs to be closed down for various reasons, often due to bankruptcy and bad debt. It is then that a liquidator is required. The person is responsible for winding down the company, selling available assets, and paying off the creditors.
Liquidators are legally empowered to carry out their duties, including asset sales, closing down the business, paying off employees and the workforce, and other creditors, including banks or any institution that has given loans to the company.
Main functions of liquidators
As the term suggests liquidators are meant to liquidate all the financial assets of the business and turn them into cash to pay creditors. They are
- They have the legal power to wind down the business
- They may collect any outstanding or receivables of the business.
- They may need to defend or instigate lawsuits.
- They have complete authority – often under the court’s supervision – to decide how to sell the assets and other business items including goodwill accrued by the company.
- If any new items have been ordered, the liquidator can stop the orders from going through
- Furniture and other assets are sold off. These include any items used in the office such as computers, laptops, lights, decorative items, papers, copiers, and machines.
- They can go through accounts and check out balance sheets for fraud or any discrepancies.
While the services of liquidators are typically used during insolvency proceedings, they may also be called in the case of small businesses merging with larger ones or if a department in a corporation becomes superfluous and is not needed anymore. Liquidators may also be used to wind down the company if it is not making any profits and needs to close down its business, avoiding bankruptcy.
Who appoints liquidators?
If the company has filed for bankruptcy, the court may appoint a liquidator to manage all the assets and closure of the business.
However, a large creditor may also approach the court to initiate recovery of monies owed and may also appoint a liquidator.
In the case of a public limited or even a private limited company, shareholders can call for liquidation proceedings to be initiated if the business entity is always making a loss and the stakeholders have no way of getting their money back.
If the company is going in for voluntary liquidation, then the person or persons in charge can also appoint a liquidator to help with the closing process.
A liquidator has a complex task. The person has to do a lot of paperwork and may even need to hire experts to handle various aspects of sales and closure. The person handling the liquidation proceedings is paid first. The rest of the money got from the sales of all assets is paid to clear secured debt according to certain percentages. Unsecured debt is the last on the list.
Final words
The role of liquidators in business asset sales and closures is immense. Whether the business is on the verge of bankruptcy, in the process of being acquired or merged, or closing down a section of the business or even the entire business voluntarily, the liquidator is the right person to handle all the legal and financial details.
