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Could there be any alternatives to liquidation for your beauty salon?

The ongoing coronavirus pandemic continues to cause severe financial distress in the beauty industry, despite government efforts to mitigate its impact on businesses. 

Beauty salons have been significantly impacted by COVID-19 restrictions and lockdowns, leading to unmanageable financial situations for many. If you believe your beauty salon needs to go into liquidation, it’s important to seek professional advice as soon as possible. 

As a director, your obligations change in insolvency and you must prioritise the interests of creditors. InsolvencySupport.co.uk can guide you on the best options and ensure you comply with all legal requirements for insolvency and company liquidation. There may be alternatives to liquidation, so it’s crucial to get professional guidance.

The financial impact of COVID-19 on beauty salons


The beauty industry has faced major challenges due to the coronavirus crisis. Salons were forced to close during lockdowns, and reduced client numbers due to social distancing restrictions further impacted their operations. This has led to a significant decline in profits for many beauty salons, leaving few opportunities for diversification or simplification of their business model. 

If your beauty salon is facing financial difficulties and may need to go into liquidation, it’s important to consider all options. Consulting with a professional can help you explore alternatives and ensure you make the best decision for your business.

Liquidation process for beauty salons


If your beauty salon needs to be liquidated, you’ll need to enter the process of Creditors’ Voluntary Liquidation (CVL). This procedure gives you, as a director, some control over the process by allowing you to choose the liquidator – who must be a licensed insolvency practitioner – and the timing of liquidation. 

When your business becomes insolvent, as determined by its cash flow and/or balance sheet, you must stop trading immediately to prevent further losses for creditors. Continuing to trade when insolvent could result in accusations of wrongful trading and potential consequences, such as disqualification as a director or personal liability for creditor losses.

Steps for liquidating a beauty salon business


Creditors’ Voluntary Liquidation involves the auction of all assets of the company, with the proceeds being used to repay creditors in the proper order. This includes the professional valuation and sale of all stock, salon equipment, fixtures and fittings, and technology owned by the business. During this process, all directors of the company are investigated to determine the reasons for its decline. 

If the company has taken out loans and you have given a personal guarantee, this will be enforced by the lender. If you’re worried about the impact of liquidation on your personal finances or ability to fund a CVL, it’s important to know that you may be eligible for redundancy pay as a director.

Unemployment compensation for beauty salon owners


To be eligible for redundancy pay, you must have been an employee of the company with an employment contract and a regular salary paid through PAYE, just like other employees. 

If your beauty salon needs to be liquidated, we can quickly determine if you’re eligible for statutory redundancy. This lump sum payment can help cover the professional fees for Creditors’ Voluntary Liquidation and/or repay any outstanding company debt. 

The average claim for director redundancy is approximately £9,000, which can also provide financial support following the closure of your business.

Options for avoiding liquidation for a struggling beauty salon


It’s possible that your beauty salon business may be able to recover with added funding, as the economy gradually reopens. Alternative financing, which is more flexible than traditional bank lending, may provide the needed support for your cash flow. Another option is to formally renegotiate your debts. An insolvency practitioner will need to evaluate the long-term viability of your business, and if it’s deemed to be feasible, a Company Voluntary Arrangement (CVA) can help prevent liquidation.

InsolvencySupport.co.uk can provide more information and guidance on your specific situation, with over 25 years of experience in helping company directors with voluntary liquidation. We’ll present your best options and ensure you fulfil your obligation to creditors. Contact us for a free, same-day consultation. We have a wide network of offices throughout the country, so professional assistance is always nearby.

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