The Pros and Cons of Winding up

At Express Tax Solutions we believe it is important for you to know the pros and cons of Winding up; and by comparing the two together and how it may affect your circumstances will help you gain a better understanding of the overall process.

By entering into Winding up procedures you will be able to demonstrate to all your creditors of your commitment to resolving your financial situation and to use the time implement a practical solution to repay the creditors.

The Pros

The advantages of winding up are:

• The partners can initiate the winding up action themselves individually in order to avoid disqualification of the partners depending on their actions before the failure of the business and depending on whether all the partners acted in the best interests of the creditors at all times.
• The partnership will be restructured in rescuing work carried work.
• As the creditors will be aware that an IP is appointed it will give them some reassurance of a better return, as well as making them aware that an investigation will be carried out by the liquidator of the conduct of the partners.
• The partnership will not increase debts.
• The partnership will be able to quickly terminate leases and other contractual liabilities.

The Cons

The disadvantages of winding up are:

• The business assets may be a lot less than if the business was to continue.
• You may not get the best value for your assets at a liquidation auction
• There is likely to be claims from the landlord regarding lease liabilities, HP Agreements, any other lease contracts and employee claims and the overall debt position can actually increase.
• There may be no or very small dividends which would be available for unsecured creditors.
• It can be expensive but these costs can be recovered from the business assets provided there are sufficient funds. If there are not however, the partners will be responsible for providing the fees or any shortfall.
• This can lead to the personal bankruptcy of the individual partners
• The partners cannot reuse the same trading name for a period of 5 years.
• Creditors may prefer other rescue mechanism such as simultaneous individual voluntary arrangements (SIMIVA) partnership voluntary arrangements (PVA) or partnership administrations (PA) as they may consider that higher returns will be available to them.