Category Archives: voluntary liquidation

Financial Business Crimes

business crimesRunning a business is no easy affair. It takes a great deal of time, effort, money and skill to start one and all the more to maintain and build it up. One very crucial aspect to this comes in the form of finances. The financial side of the business is always one very tricky and sensitive matter to the point that it is fairly easy to commit mistakes. That said, here’s the list of common financial business crimes.

#1: Borrowing money when you don’t need it

Many entrepreneurs think that just because the bank is willing to lend, they are under obligation to take advantage of the opportunity. This mentality is under the idea that borrowing now when lenders are willing will be fine as they can simply set the cash aside for when they are needed. Wrong. Loans come with interests and these are expenses. If there is no need for it then by all means do not get one.

#2: Overdoing it with receivables

As much as possible, sales on credit should be avoided or at least minimized. Unless there is a valid reason for it and the entity has adequate skill and knowledge when it comes to their management, companies must do away to avoid the risks of bad debts, liquidity issues and collection headaches.

#3: Pricing goods and/or services too low

Many startups believe that low prices bring the money in. This could perhaps work but it does come with its consequences. For starters, this shall only be feasible for a short span of time. Low prices may mean inadequacy to meet costs and expenses in the long run. Costing should be regularly revisited to ensure that the entity is running on profits not losses.

#4: Overspending on unnecessary things

Many entities think that just because the bigger companies have it or their competitors do it mean that they should too. No two organizations are the same and what might work for one may not work for another. Do away with all the unnecessary and lavish expenses especially if they do not bring in value. Avoid the impulse.

#5: Over-hiring employees

The more isn’t exactly the merrier. Numbers do not necessarily equate to productivity. A qualified employee can do so much more than a team of under-qualified staff. Moreover, hiring way too much overhead will balloon up costs all while bringing in the same level of sales essentially lowering profits. Hire when only when you need to and make sure that they count.

Here’s our question for you. Have you committed any of these financial business crimes?

Misconceptions About the Members Voluntary Liquidation

liquidationThe Members Voluntary Liquidation or an MVL as others would prefer to call it is only one of the three types of liquidation. It is where the shareholders of a company, through its board of directors, adopt a voluntary winding up resolution and at the same time appoint a qualified practitioner as liquidator to facilitate the procedure, sell the business assets and distribute proceeds to all qualified parties. Check out http://www.aabrs.com.

Among the three types, the MVL happens to be always riddled with confusion and heaping misconceptions. We don’t really wonder why as most people often relate the word ‘liquidate’ to losses which isn’t always the case. To better align our facts, we’ve listed down the myths versus the truths for everyone’s perusal.

Misconception: All companies can take on an MVL.

Truth: Only liquid and solvent entities can call for the procedure. In other words, these companies are operational and therefore can meet both short and long term obligations. Insolvent and financially incapable businesses are prohibited from taking a Members Voluntary Liquidation to avoid fraudulent misleading of creditors and illegal shedding of liabilities. This is why a ‘statutory declaration of solvency’ is required.

Misconception: Shareholders and owners get nothing.

Truth: This is completely false. Of course shareholders and owners are bound to receive from the distribution as the entity, being solvent as it is, can fulfill its obligations and is thus characterized by a bigger ratio of assets to liabilities and cash inflows to outflows. The order of distribution however will begin with creditors. They will be paid in full first before shareholders do.

Misconception: Directors and officers lose control.

Truth: Because the MVL is a voluntary procedure, the corporate directors and owners retain control over the company. The creditors do not gain any amount of control over the corporate operations and affairs. The entity even gets to appoint the liquidator in this case.

Misconception: It is taken to avid losses.

Truth: This is only partly true. Indeed, one of the reasons why some companies call for a Members Voluntary Liquidation is because they want to averse certain risks. This can be future losses brought about by an imminent factor that is unavoidable or difficulties due to the death, retirement or resignation of a crucial member of the organization. Other causes for the procedure include retirement of the owners, absence of a qualified and willing heir or successor and reinvestment purposes.