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The harsh reality of business is that not all companies survive, and if your limited company cannot pay what it owes, you may need to consider liquidation.
If your company has debt and can’t meet its outgoings, then it is insolvent. On the other hand, if there is no realistic prospect of saving it or improving the situation, liquidation may be the best course of action.
When you liquidate a company, your organisation’s assets are used to pay off its debts, with anything leftover going to shareholders. An Insolvency Practitioner oversees this process, and we work with you to achieve the most desirable resolution in this scenario.
If your business cannot pay what it owes, then it is insolvent and you will likely need to liquidate your company to close it.
At Marchford we are proud to collaborate with some excellent professionals offering liquidation services.
A CVL is actioned by the director if the company is in financial distress and insolvent.
To place a company into voluntary liquidation, the directors and/or shareholders will appoint an insolvency practitioner who will take control of the company.
Directors can choose who to appoint as the insolvency practitioner. Directors will pay the insolvency practitioner’s fees. In many instances these fees will be taken from the company’s assets, however, if there are insufficient assets available then the directors will have to personally make up the shortfall using personal funds.
Directors may be entitled to claim for redundancy should their company become insolvent which can be a valuable lifeline at a time when personal funds are likely to be tight.
What is director redundancy?
Many company directors are also classed as employees of the business and will be entitled to claim redundancy. Certain criteria apply; directors must be on the payroll and the company must have been incorporated for at least two years.
An MVL is actioned by the company directors when the company is solvent and has value to extract
Directors will appoint an insolvency practitioner to take control of the MVL to offer in a tax efficient way of distributing the assets, including any cash value.
A compulsory liquidation is actioned by the courts following the presentation of a Winding Up Petition by a creditor.
The Insolvency Practitioner will be chosen by creditor who will expect that every action taken by the directors in the lead up to insolvency is considered.
Leading up to this the company will have been chased by the creditor for payment for and served with a Statutory Demand with 21 days to pay or dispute the debt. If company fails to take either action the creditor can petition for the company to be wound up – also known as compulsory liquidation.
The insolvency practitioner takes control of the business, meets deadlines for documents, complies with authorities, settles claims against the company, interviews the directors and reports on the reasons for the liquidation.
Once a company enters liquidation the insolvency practitioner has a statutory duty to complete a full company investigation.
The investigation will look at the directors conduct and consider if there has been any wrongful trading, preference payments, transactions under value or an inappropriate director’s loan account. There is also an obligation to consider if any borrowing was taken and spent correctly, particularly Bounce back Loans.
If the Insolvency Practitioner finds evidence of any of the above, they must take any necessary actions to recover monies for creditors which could include asking a director to repay funds to the company.
Liquidating your limited company can be a stressful time and for most there may be many questions you havewhich we have answered here.
Please do not hesitate to get in touch if you wish to speak to someone.
Between 12 and 36 months depending on the position of the company affairs.
Small limited companies with few assets and creditors will cost around £4,000-£6,000 plus VAT
Redundancy claims –redundancy applications can be made to the National Insurance Fund (NIF) by both the employees and directors (criteria do apply)
No more legal action – as soon as your company enters the liquidation process, your creditors are no longer allowed to pursue legal action against the company.
Your conduct will be investigated – the insolvency practitioner is obliged to carry out an investigation into the director’s conduct.
Cost – Directors will pay the insolvency practitioner’s fees for dealing with the liquidation
At Marchford we are proud to collaborate with some excellent professionals offering liquidation services. Our team have long standing working relationships with licensed insolvency practitioners that know and trust.
We also collaborate with the market leader for assistance with director redundancy, which is a complicated and difficult process.