I have helped and guided hundreds of companies and their directors through company liquidations over years. When asked about my work the following comment is often made, “They went bust and started up again the next month, doing the same thing!”. The accompanying tone is usually one of outrage. In fact, it’s not that simple to judge! I would ask those of that opinion to pause for a moment, and consider that there are many reasons for the insolvent liquidation of a company.
Very often a company has suffered from bad debt itself, caused by clients not paying, or indeed going into liquidation themselves, leaving the company unpaid and causing its own demise. One of the very first cases I dealt with, was a family business that had four major customers ‘go bust’ on them in one week, causing the loss of £40,000. Quite a sum 30 years ago! The company simply could not sustain the loss and went into liquidation. Up until that devastating blow, the company had been successful and was providing employment for 40 staff. The other point I try to make when talking about businesses “phoenixing”, and doing the same thing as before, is the inescapable fact that when a plumber (for example) goes into liquidation or personal bankruptcy, he doesn’t wake up the next morning as a brain surgeon. He’s still a plumber, with a family to feed, and a mortgage to pay. Hence it is only natural that he picks himself up, dusts himself off and starts all over again. (We know a song about that don’t we).
Whilst saying the above, I am naturally aware that there are unscrupulous people out there who make a habit of liquidating companies, leaving unpaid creditors, but it is those who are genuine people, working hard to provide for their families and have suffered through external influences (such as Covid-19), that I ask not to be “tarred with the same brush”. After all, there but for the grace of God go any of us!