If you find that your company is going through serious fiscal issues, you’ll likely urgently be trying to calculate which route forward you should aim to take. Two common options that you’ll come across include closing down and restructuring.
While they can be used in similar contexts, the end results will be drastically different. It’s important to have at least some understanding of their similarities, their differences, and which option will be better given your current situation.
What does closing a company mean?
Closing down a company is pretty much what the name suggests. It refers to the formal cessation of trading, the selling off of all of the company’s assets, and the redistribution of those assets to any creditors who are owed outstanding debts. This will need to be done with assistance from an insolvency practitioner such as Chamberlain & Co.
During this process, the company will typically be struck off from the register at Companies House, meaning that it no longer exists. As a result, this is not a process that can be reversed; it is final, and cannot be gone back upon.
When is it best to close a company?
Closing down a company will typically be an appropriate solution for businesses that are insolvent and that have no reasonable way out of insolvency. That being said, it can also be an appropriate solution for business owners who no longer want to run the company in question, and who also don’t want to sell the business to a new owner.
What does it mean to restructure a company?
Restructuring refers to the process of attempting to take a company through a time of financial ill health. Instead of closing down the company in question, a restructuring plan aims to salvage the business, trying instead to reorganise the debts and bring the company to a position where it can start to turn a profit again.
This will generally necessitate proving to creditors that there is a reasonable chance that the business can be saved, and that this option is more likely to result in their being fully repaid.
When is it best to restructure a company?
Restructuring is typically a better solution for businesses that have a chance of being saved, so long as all relevant stakeholders can be persuaded that this is a reasonable possibility.
In these cases, it will generally be a more productive solution, allowing for the business to still survive when it comes out the other end. Of course, this also depends on the willingness and ability of the owner of the company to continue trading.
It’s crucial that you receive expert advice on the nuances of these two different approaches, advice that is relevant to the particular situation that your business finds itself in. Reaching out to an insolvency practitioner sooner rather than later will ensure that as many different solutions as possible remain available to you, and that you’re able to take your business through a tricky period in the easiest manner possible.
