Liquidation

Liquidation is the process whereby a company winds up and sells its asset, whether that company is solvent or insolvent. It typically happens when a business has gotten to a point where it has chosen to close the business, for one reason or another. Such company can decide to turn its assets into cash, so as to pay off some debts, depending on the level of investment creditors have made, or the amount of loans collected to grow the business.

In such instance, the company will be liquidated, and all activities brought to a close. This is the situation a shoe firm located in Buxton, Derbyshire, has found itself in. The British shoe firm went into liquidation after losing its Clark’s contract which accounted for about half of the £18 million turnover. The company had 50 employees, and has now been liquidated voluntarily in a process which means they will still continue to exist.

Redfoot Shoes which is located in Bacup, East Lancashire will carry on its online operation, having invested £1 million, buying its stock, intellectual property and website. As a part of this planned event which began this year, Bells Shoes is now under solvent voluntary liquidation. An insolvency practitioner called Steven Wisesglass is the liquidator. He is a directed at Inquesta, which is a firm located in Manchester.

Why will a company liquidate?

The major reason why a business will liquidate is because of insolvency. Insolvency is a situation whereby you seek the assistance of an insolvency consultant as a company is unable to meet payments. Causes of insolvency could be:

  • The company was run for the wrong reasons: This could happen when it is set up as a hobby rather than as a business.
  • Insufficient working capital: Costs are more than expected at times, so you need more than one source of capital.
  • Wrong business location: This happens when the business potential is not fully explored.
  • Lack of planning: As the saying goes, ‘if you fail to plan, you plan to fail.’ It is important to have a plan for your business.
  • Lack of marketing skills: When a business waits for opportunity to come to it, but lacks sales force or a website.

There are three different instances whereby a company can be liquidated:

  1. Members’ voluntary liquidation: when the business is able to handle payments, but owners choose to wind-up.
  2. Creditors’ voluntary liquidation: This happens when the company’s director sees that the company is not able to pay off its debts, he/she then decides to begin the liquidation process after consulting with the board of shareholders.
  3. Compulsory liquidation: In this instance, the company is totally unable to issue out payments, so the director writes directly to be court so as liquidation process can be implemented.

Bells Shoes is under creditors’ voluntary liquidation, which began early this year, and is rebranded as Bells of Buxton.