When your business faces financial challenges, it can feel like a heavy weight on your shoulders. Understanding your options – like the difference between business rescue and liquidation – can bring clarity and help you take confident steps forward.
Both processes serve different purposes and can have very different outcomes for you, your creditors and your business. This guide breaks down what you need to know about business rescue and liquidation, empowering you to make informed decisions when it matters most.
Need help now? Get in touch with our liquidation and business rescue experts today.
What is business rescue?
Business rescue refers to strategies or formal processes aimed at saving your business and helping it to continue trading. It’s a way to tackle financial problems head-on, restructure your debt and get back on track. Common business rescue options are…
Company Voluntary Arrangement (CVA)
This formal agreement with your creditors to pay off your debts over time while continuing to trade. If you meet the criteria, in a CVA you can apply for a moratorium to stop creditors taking legal action on the included debt. This gives you breathing space to work on recovering your profitability.
Administration
In this process, you appoint an administrator to take temporary control of your company and find a way to save it. This could mean restructuring or shutting down parts that aren’t profitable for you.
Informal Arrangements
You can also negotiate directly with creditors to reduce or delay payments without entering formal insolvency procedures. This approach relies heavily on strong relationships with creditors and can be an alternative to formal options. However, it lacks the legal protection of processes like a CVA or administration.
Our insolvency professionals can advise you on and guide you through these business rescue solutions. Get in touch for an expert view on your business’ situation.
What is liquidation?
Liquidation is a formal way to close down your business when it’s no longer viable. This typically happens when a business cannot pay its debts and has no realistic prospect of recovery. It involves selling off assets to repay creditors and legally dissolving the company.
The exception to this is Members’ Voluntary Liquidation, which is a liquidation process for solvent businesses with significant retained profits.
Creditors Voluntary Liquidation (CVL)
Creditors’ Voluntary Liquidation is initiated by company directors when the business is insolvent and unable to pay its debts. It allows directors to take proactive steps to wind down the company in an orderly way, ensuring that creditor interests are addressed fairly.
When managed by a reputable licensed insolvency practitioner, a CVL can be used as a business rescue process – in a process called phoenixing.
Compulsory liquidation
This is a type of liquidation forced by a court order, usually following a creditor petition due to unpaid debts. The Compulsory Liquidation process is often initiated as a last resort by creditors seeking repayment.
Members’ Voluntary Liquidation (MVL)
For solvent businesses only, MVL is a tax-efficient way to close down a company when it’s no longer needed. Directors must demonstrate solvency and the company’s ability to repay all debts in full.
Our liquidation and business rescue experts can help you explore your options, so you can make the best decision for your future.
Key differences between business rescue and liquidation
Understanding the distinctions between business rescue and liquidation is crucial when deciding your next steps. Clarifying these differences helps you approach the situation with the right mindset and realistic expectations. Here’s how they compare:
When to consider business rescue
If your business has underlying potential but is struggling with cash flow or debt, business rescue could be the solution. It’s particularly suitable if:
- Your business can become profitable again with restructuring.
- You have the support of key creditors willing to work with you.
- Your business has assets, contracts or intellectual property worth preserving.
Choosing a business rescue option early can prevent further deterioration of your financial position and increase the chances of success.
Get help from our licensed insolvency practitioners today for expert liquidation and business rescue advice.
When to consider liquidation
Liquidation could be the best choice when your business is insolvent and has no realistic prospect of recovery. Signs that liquidation might be necessary include:
- Mounting debts you can no longer service.
- Pressure from creditors, such as statutory demands or winding-up petitions.
- No viable plan or opportunity to return the business to profitability.
Liquidation ensures that outstanding debts are addressed in an orderly manner by selling off the company’s assets to repay creditors proportionally. While the company is closed, you might be able to start afresh with your business, without lingering financial liabilities.
Making the right choice for your business
The decision between business rescue and liquidation depends on your unique circumstances. While business rescue focuses on recovery and continuity, liquidation provides a clean slate when closure is the only viable option.
Working with a licensed insolvency practitioner ensures you receive expert advice tailored to your circumstances.
It’s our role to:
- Assess your financial situation.
- Advise on the best course of action.
- Handle negotiations with creditors and legal formalities.
The sooner you seek help, the more options you’ll have available. By understanding your options and seeking professional advice, you can navigate this challenging period with confidence and clarity.
For more information and support tailored to your situation, contact our business rescue and liquidation experts today. We’re here to help you make the best decision for your business and future.
