Liquidation as a concept has quite a few negative connotations attached to it. This is because nearly every time a company gets liquidated, it is either unprofitable, under debt, on its way to bankruptcy, or all of the above.
However, what many people do not understand is that liquidation in itself does not have to be all bad. In fact, it can be the push your company needs to switch gears and explore a different direction entirely.
So, let us shed some light on how you can turn your commercial assets into profits with nothing but strategic asset disposal!
What is Meant by Commercial Asset Disposal?
When a company is undergoing bankruptcy, it may have some unsold stock sitting in a warehouse or stockroom. These are the company closure stocks, and they cannot be sold through regular channels anymore due to the company’s financial condition. In such cases, the stock turns into commercial assets that need to be liquidated or disposed of.
This disposal process requires the company to fire all its employees, sell the stock to a buyer, auction it off, and use the sales generated from it to pay off all the debt or distribute it among the shareholders.
Types of Liquidation
There are two distinct types of liquidation:
1. Voluntary Liquidation
This type of liquidation occurs when a company or the head of a company decides to liquidate all its assets to pay off its debt to creditors.
2. Compulsory Liquidation
This type of liquidation occurs when the debt collectors or creditors initiate the liquidation process through the legal system.
How Can You Profit from the Liquidation of Company Closure Stocks?
To ensure that you do not end up with a net loss after liquidation, here is a step-by-step process of everything you need to do:
1. Take Inventory of Your Company Closure Stock
The first step when your company has been declared bankrupt by the court or your shareholders is to take inventory. You need to know the exact quantity of your remaining stock so that everything can be auctioned off or sold, easily.
Typically, this job is performed by a liquidator. The appointed liquidator will have the main responsibility of overseeing all the proceedings of the liquidation process. This involves the selling of all the assets and the fund distribution.
2. Notify Debt Collectors or Creditors
The liquidator is also responsible for notifying all the creditors of the company that the business is being liquidated. This allows them to submit claims for all their debts that are owed by the company. There should be a strict deadline for these claims, and the applications must be closed afterwards.
3. Find an Asset Disposal Partner
Once everything has been dealt with, the liquidator is tasked with finding a reputable asset disposal partner or auctioning all the stock of the company. In such cases, auctions do not do as well, as your stock usually gets sold at a lower value than its worth. These funds will most likely not even cover the debt owed by the company.
On the other hand, if the liquidator is able to get in touch with the right disposal partner, the funds collected may be able to cover all the debt and even be distributed amongst the shareholders. This will be discussed at length later on in the blog.
4. Distribute All the Funds
After all the stock has been liquidated, the only remaining step is to distribute the funds collected to the creditors and the shareholders. This distribution is done on the basis of priority:
- Secured creditors that provided a loan to the company against its assets are compensated first and foremost.
- Preferential creditors are the unpaid employees and any outstanding taxes of the company, as they have second priority.
- The unsecured creditors, which gave the company a loan that was not secured by the company’s assets, are given third priority.
- Lastly, the shareholders will receive the rest of the funds collected according to their respective number of shares.
How to Find the Right Commercial Asset Disposal Partner?
A commercial asset disposal partner will not only streamline your liquidation process but will also allow you to collect more funds than auctions. This is because these partners purchase assets from closing businesses and help with stock clearance. Following is everything you need to find the right commercial asset disposal partner:
1. Assess Your Business Needs
Start by evaluating the amount of funds you need to generate to make the liquidation of your company profitable. Different types of assets, such as electronics, machinery, or hazardous materials, require specialised handling. If you understand your disposal needs, you can choose a partner with the necessary expertise and capabilities, like Surplus Solutions Group.
2. Research and Compare Providers
Look for companies with experience in handling the type of assets your business generates. Compare their services, track record, and reviews to ensure you’re selecting a reliable provider.
3. Ensure Compliance and Certifications
Look for certifications which indicate that the provider adheres to all regulatory standards. Certified companies in the UK, like Surplus Solutions Group, demonstrate a commitment to responsible asset disposal and ensure that your business remains compliant with the national legal regulations.
4. Review Customer Support Options
Good customer support is essential when dealing with asset disposal. You’ll want to work with a partner who can address any concerns or questions promptly. Assess the customer support options available, such as 24/7 support lines, quick response times, and availability of on-demand services.
5. Examine Contract Terms and Pricing
Review the contract terms and pricing structures of your shortlisted providers. Additionally, you need to refer to the debt your company owes to get the best value for your company closure stocks.
6. Seek Recommendations and References
Ask for recommendations from other businesses in your industry before making a final decision. You can also request references from the asset disposal providers themselves to gain first-hand insight into their service quality.
7. Review the Agreement One Last Time
Before finalising the contract, it’s important to review your agreement with the disposal partner and make sure that the partnership remains beneficial for both parties.
To Wrap Up
While the prospect of liquidation might initially seem daunting, with the right approach and partners, it can be turned into an opportunity for regeneration and even profit. The key takeaways are to carefully manage your inventory, communicate transparently with creditors, and choose an asset disposal partner that meets your specific needs. Liquidation doesn’t have to be the end of the road; instead, it can be a pivot point towards a new beginning.
Make liquidation your chance to reassess, reconfigure, and potentially reinvent your business strategy for future success with Surplus Solutions Group. We also provide eco-friendly waste disposal services for commercial businesses if you are looking for a UK waste disposal unit.
