Reasons to Opt for Company Liquidation

3.Excessive Debts and Lack of Stable Sales

When your business is accomplishing well, paying back debts and dealing with the cost of property rental is easy to manage. However, a single month of bad sales is often all it takes to cause your debt-related costs to exceed your monthly income. Borrowing excessively places your company. A single period of low sales can lead to its failure. Therefore prepare ahead of time by keeping cash within your business to make up for temporary downturns in sales and revenue.

4.Poor Retention of Important Employees

Just like losing a vital customer can lead to the failure of your business, failing an essential employee can also lead to the weakening of the organization. If your business is reliant on some key staff members, it is vitally important for the business to retain them for as long as possible.

5.Cash Flow Crisis due to Limited Fund

When your company earns thousands of dollars in profit every month, it is easy to assume that you can take a large amount of money out of business without affecting its stability. Even if your business is doing remarkably well and generating more substantial profits, it is essential that you keep the cash in your business bank account to cover expenses such as payroll, rent, production, taxes, and other necessary costs.

6.Competition

This is one of the fundamental causes of the liquidation of the companies. If there is stiff competition for your business, lots of money goes into marketing your product to make it better from the customer’s point of view. And if this fails, you don’t just lose the customer or the market, but you also lose your money. This can cause the management to sell off company stakes, also known as liquidation.

Insolvency, when it happens, is instigated by loss of capital, loss of income and loss of credit. When this happens to a business, it is the duty of the management to take corrective measures else the company will have to shut down. Although many companies are all too well aware of their problems, they fail to deal with the issues correctly.

Business insolvency can occur in degrees of difficulty:

• Receivership- A receivership is when a bank appoints a receiver to sell the assets it has safety over. This happens when a business is said to be salvageable,
• Liquidation- If a company isn’t regarded as salvageable, the company is wound up by either apply for an intentional liquidation or liquidation processes directed by a liquidator appointed either by creditors or a court.

To understand more about company liquidation and how it can help your business, you can take the assistance of the experts at JAXA Chartered Accountants.

We at JAXA Chartered Accountants help business with services like audit and assurance, accounting and bookkeeping, VAT, tax services and much more in the UAE. Contact us today should you need to avail of any of the services mentioned above.