Despite extensive government initiatives designed to combat the negative effects of coronavirus on businesses, the pandemic continues to cause severe financial distress in the beauty industry.
Beauty salons have been severely impacted by Covid-19 restrictions and lockdowns, and the length of time this pandemic has continued is creating an unmanageable financial situation for many.
So if you believe your beauty salon needs to go into liquidation, you should seek professional advice without delay. When a business enters insolvency your obligations change as a director, and you must ensure you place your creditors’ interests first.
UK Liquidators can explain your best options and ensure you take the right steps in dealing with the decline of your beauty salon business. There may be alternatives to liquidation available, but if not, we’ll ensure you meet all the legal requirements concerning insolvency and company liquidation.
The beauty industry has been severely affected by the coronavirus crisis. Salons were unable to serve clients during lockdown, and suffered reduced clientele due to social distancing rules when they were allowed to open.
Profit levels have been seriously compromised, therefore, with few opportunities available to diversify or simplify an ordinarily successful business model. So what happens if your beauty salon needs to go into liquidation, and could there be any other options?
Creditors’ Voluntary Liquidation (CVL) is the process you’ll need to enter if your beauty salon has to be liquidated. It’s a procedure that offers you some control as a director, as you can choose the liquidator – who must be a licensed insolvency practitioner - and the timing of liquidation.
As soon as your business becomes insolvent – typically determined by reference to your cash flow and/or balance sheet – you must cease trading and make sure your creditors don’t suffer any further losses unnecessarily.
If you continue to trade when insolvent you could face accusations of wrongful trading, and face sanctions further down the line. These might include disqualification as a director, for example, or even personal liability for additional creditor losses.
Creditors’ Voluntary Liquidation involves the sale at auction of all your company assets, with the proceeds going to repay creditors in the statutory order. All of your stock will be professionally valued and sold, as will any salon equipment, fixtures and fittings, and technology owned by the business.
All directors whose company goes into liquidation are also investigated to identify why the business declined. Additionally, if the company has borrowed money and you’ve provided a personal guarantee, this will be invoked by the lender.
If you’re concerned about your personal finances in this respect, or you’re worried that you won’t be able to fund a CVL, it’s important to know that you may be able to claim redundancy pay as a director.
You must have worked for your company as an employee to be eligible for redundancy pay. This means you should have an employment contract in place, and receive a regular salary through PAYE as would other employees.
We can quickly establish whether you’re eligible to make a claim for statutory redundancy if your beauty salon needs to be liquidated. A lump sum payment such as this can cover the professional fees associated with Creditors’ Voluntary Liquidation and/or pay outstanding company borrowing.
The average claim for director redundancy stands at around £9,000, so it could also help support your personal finances following the closure of your business.
It’s possible that your beauty salon business might survive with additional funding, while the economy fully opens up. Alternative finance is more flexible than traditional bank lending, and could provide the support needed for your cash flow.
Formally renegotiating your debts is also a potential option. A licensed insolvency practitioner would need to assess your business for long-term viability, and, if it’s deemed to be viable a Company Voluntary Arrangement (CVA) could help you prevent liquidation.
These are just two potential options, and UK Liquidators can provide more information and advice on your individual situation. With over 25 years’ experience of helping company directors voluntarily liquidate their business, we’ll present your best options and make sure you fulfil your duty of care to creditors.
Please get in touch with one of the team to arrange a free, same-day consultation. We operate a wide network of offices around the country, so professional help is never far away.
If you are considering liquidation for your limited company, taking advice from a licensed insolvency practitioner can help you understand your options.
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If you are considering liquidation for your company, taking expert advice at an early stage is crucial. At UK Liquidators, our team of licensed insolvency practitioners are committed to providing limited company directors with the help and advice they need to make an informed decision.
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