What are the pros of CVL?
- Creditor Protection: The process ensures that creditors are treated fairly, as it is overseen by a court and a liquidator who acts in the best interest of all creditors.
- Finality: Compulsory liquidation provides a clear end to the company’s operations, which can be beneficial for both directors and creditors, as it resolves outstanding debts.
- Structured Process: The liquidation process is systematic and legally regulated, reducing the likelihood of any impropriety or mismanagement.
What are the cons of CVL?
- Loss of Control: Once compulsory liquidation begins, the company’s management is taken over by the appointed liquidator, and the directors lose control over the business.
- Impact on Credit Rating: Compulsory liquidation significantly affects the company’s credit rating and may impact the directors’ personal credit ratings, making it difficult to secure future funding.
- Stigma and Reputation Damage: Being associated with compulsory liquidation can harm the reputation of the directors and shareholders, affecting their future business prospects.
- Potential for Investigation: If there are concerns about the conduct of the directors leading up to the liquidation, they may face investigations, which could result in personal liability or disqualification from directorship.