[su_spoiler title=”How much does a liquidation cost?” open=”yes”]
In all cases we will explore options to make the liquidation of a company self-funding. If the company has no future and very little cash or assets, putting the company into liquidation BEFORE it runs out of cash and assets will help make the process easier. This is the common mistake made by many directors who don’t act soon enough. Instead, they wait, thinking that something will turn up. The company runs out of cash and ends up facing a compulsory liquidation which carries with it more risk for the directors.
A Company Voluntary Liquidation (CVL) allows the company to be closed in a managed way, avoiding the stress and risk associated with a compulsory liquidation. Typically the cost will depend on the number of creditors involved, staff numbers, assets etc but in general the cost will range between £3,500-£5,000 plus VAT and disbursements.
Don’t be fooled by misleading advertising with the promise of ‘cheap liquidations’. Every formal CVL process must be conducted by a licensed practitioner and involves strict regulation. There are costs which need to be paid to cover statutory advertising, insurance, license, convening of creditor meetings and reporting to creditors. There are no short cuts; every CVL has the same process.
[su_spoiler title=”Can I close my company and start again without the debt?”]
This is often referred to as a “Phoenix” and many think this is illegal but in fact, carried out correctly, it is an effective means to preserve an insolvent company. A pre-pack sale is a process co-ordinated by the existing management of an insolvent company where the business and assets are sold at market value to a new or related company or to the existing directors, who then re-employ the existing staff and produces the same goods or services, often from the same premises. Of course, pre-packs have generated some negative publicity particularly if the former directors are seen to be simply getting rid of debts and unwanted or onerous contracts, but conducted correctly the process can be beneficial for all concerned.
[su_spoiler title=”What does a Liquidator do?”]
Anyone undertaking the duties of liquidator (administrative receiver, administrator or supervisor of a corporate voluntary arrangement) must be a qualified insolvency practitioner (IP).
When the liquidator is appointed he assumes the role of the directors and their powers are transferred to him. He will carry out investigations and report to the Companies House Registrar, interview the directors of the company and recover money to repay creditors and if possible, shareholders and dismantle and deregister the company officially.
[su_spoiler title=”What about staff wages?”]
Very often directors come to us having used the last of company’s funds to pay staff wages when in fact a legitimate claim can be made to the Redundancy Payments Office. These include unpaid wages in the four months prior to the commencement of the liquidation, statutory notice, redundancy pay and unpaid holiday pay. Currently the basis of calculations is on a statutory maximum of £400 gross per week. Contact us for advice.
[su_spoiler title=”As director can I claim unpaid wages & other benefits from redundancy payments?”]
You are also entitled to claim these sums. However, in some instances, where a director is also the controlling shareholder, a claim may be challenged by the Department of Trade and Industry. Contact us for more information.
[su_spoiler title=”Can I dissolve my company instead of liquidation?”]
A limited company can request to be closed / dissolved under Section 1003 of the Companies Act 2006. Dissolution is infrequently used as it is only permitted under certain specific circumstances. Creditors must be notified of the intention to dissolve the company and can reject the application if they see fit. You are required to complete and submit form DSO1 striking off application and pay the £10 filing fee. If your application is rejected contact us for advice.
[su_spoiler title=”Can I start another company with the same name?”]
This is possible but great care should be taken. You must not trade with a similar name as the previously liquidated company without seeking legal advice. Breaching Insolvency rules is a possible criminal offence. Contact us so we can guide you through the process.
[su_spoiler title=”What do we do as directors of the company?”]
Once in liquidation you must comply with the requests of the liquidator, provide all company books and records, complete a detailed questionnaire and attend the creditors meeting arranged by the liquidator.
[su_spoiler title=”Can I become director of another company if I liquidate this one?”]
Yes you can. The law allows this if you act responsibly.
[su_spoiler title=”Will my Company’s liquidation affect my personal credit rating?”]
Not directly, however if you lose your main source of income and stop making credit repayments on time, that will have an effect.
[su_spoiler title=”The Company owes substantial amounts of tax. Can they come after me for that?”]
The Inland Revenue have the power to issue a Personal Liability Notice against any officer of the Company for any unpaid NIC. There must be neglect to pay or fraud on the part of the directors. The Revenue can pursue individual employees for unpaid PAYE where the employee concerned knew that the employer had not deducted tax. If you have an overdrawn directors loan account this can be seen as remuneration and made subject to tax. You need to be very careful to ensure adequate wage records are kept.
[su_spoiler title=”Will the directors be allowed to buy the business or assets of the Company from the Liquidator?”]
The Liquidator is under a duty to obtain the best price that he can for the assets of the Company. He will usually obtain a valuation of these from a professional valuer. If the directors’ offer is the best offer he receives, then the assets can usually be sold to the directors.
[su_spoiler title=”What about the bank?”]
If the bank has some form of security through a debenture or personal guarantee they will probably have taken steps to learn more about the company’s insolvent position and how its security looks already. They will crystallise their security.
If the bank debt is not material, they will generally wait until the liquidator recovers the assets and receive payment in order of priority.
[su_spoiler title=”Can I avoid personal guarantees I gave to the bank?”]
With great difficulty. If you gave a personal guarantees (PG’s) and the assets of the company are insufficient to repay them in full then the bank will likely take action, to recover their money from you.
[su_spoiler title=”As director can I be held liable for the debts of the Company?”]
No. The Company is a separate legal entity and holds contracts with people or companies in its own right. Unless a director has acted outside of his authority, or has given personal guarantees, that director will not as a rule be liable for the debts of the Company.
[su_spoiler title=”What about the people to whom I owe money (creditors)?”]
Most will be fairly pragmatic about the whole thing as it’s unlikely that they will see much of a return of their debts. They are entitled to attend the creditors meeting but unless the conduct of the directors is shown to be fraudulent or neglectful of their fiduciary duties then they cannot take any further action.