John A Waller
How do I liquidate my Limited Company?
How do I liquidate my limited company? Simple!
Liquidation means your limited company officially closes. However, the process requires a licensed insolvency practitioner to dispose of all company assets and remove them from the register at Companies House.
Which option then depends therefore on whether your limited business remains solvent or insolvent.
Is your company under creditor pressure?
What are my closure options?
How do I liquidate my limited company? – Can I liquidate my Limited Company?
You remain unable to liquidate your own limited company registered in the UK.
Whether your limited company remains insolvent or solvent, you must use a licensed insolvency practitioner to liquidate a limited company in the UK.
The liquidation process of the company remains complicated, requiring a licensed insolvency practitioner registered in the UK to ensure that the proceeds from the realisation of the company’s assets remain paid out to creditors of the liquidated company. Even when a company has no assets and relatively small debt, the liquidator however must assess and investigate directorial conduct in case of wrongful trading.
I Can’t Afford the Cost of the Liquidation?
Fearing the cost of a liquidation often delays the director’s decision to proceed with liquidation. Therefore, causing further problems for directors through trading insolvent.
If worried? Don’t hesitate to contact John Waller at HBG Advisory on 0800 612 5548, who will explain ways forward and avoid further regulatory issues.
For further reference:
- If you hold back due to costs, a creditor may start winding your company up compulsorily liquidation. Therefore, directors lose control over the process and overall result since creditors will appoint their preferred licensed insolvency practitioner.
- Payment of Liquidators fees remains paid from the sale of company assets. The appointed liquidator is a preferential creditor and is legally entitled to take their fees from the realisation of company assets.
How do I liquidate my limited company? – Meaning of Liquidation (Insolvency)
Liquidation in the UK referring to the close of a limited company involves:
- Bringing a business to a closure;
- Distributing the company assets to claimants;
- A process used normally for a company deemed insolvent. That is unable to pay its creditors as and when they fall due;
- If Insolvent, referred to as a Voluntary Liquidation or Creditors Voluntary Liquidation CVL.
Liquidating an Insolvent UK Company
The stages of a Creditors Voluntary Liquidation – Insolvent Liquidation
When taking liquidation advice, maintain objectivity, ensuring you understand therefore the priority of the company’s creditors over shareholders.
Two ways exist to liquidate an Insolvent Company. However, Creditors Voluntary Liquidation remains the most common way.
Therefore, to commence placing an insolvent company into Creditors Voluntary Liquidation, you need to instruct a Licensed Insolvency Practitioner to carry out the liquidation process. The Insolvency Practitioner will then start the process of liquidation of the company. Therefore,:
1: A Directors’ meeting
Directors call a meeting to agree on the company insolvent and require liquidation. They also decide who to therefore act as “Liquidator”.
A shareholder meeting then passes a special resolution to place the company into liquidation. A 75% majority required. A minimum of 14 days’ notice must be allowed in writing to the shareholders when calling a meeting. However, if 90% agree, meetings are immediately arranged.
A Centrebind procedure additionally remains available, along with “liquidation” by written resolution.
3: A Creditors’ consultation
Now no Meeting of Creditors, however, takes place at the start of the Liquidation. Two options exist though:
A “notice of deemed consent” to creditors
At least seven days’ notice required. “Deemed consent” means creditors have no opportunity to attend remotely or by telephone. When 10% or more Creditors (by number or value) want a physical meeting, they request one, creating an additional seven-day delay.
Additionally, notice may be communicated to creditors of the chosen process above by email.
How do I liquidate my limited company? – Costs and Fees to Liquidate a Company?
To voluntary liquidate your limited company remains an efficient way to close an insolvent business. However, costs may dissuade company directors from the process, and therefore compound the financial problems of the business.
The initial cost for the process ranges from £3000 to £5000 plus Value Added Tax, to therefore collate and prepare the initial paperwork.
Virtual meeting of creditors
Allowing virtual attendance (say by video conference or by telephone). One will be required to attend the Liquidator’s offices at the meeting to answer creditors’ questions. Upon conclusion, they then sign the paperwork needed by the “Liquidator”. However, “Creditors” are not allowed to attend even if they want to physically!
Report and statement of affairs
A report required, then sent to all creditors before the virtual meeting/deemed consent. This detail’s company trading history, a statement of affairs and statutory information. The “Statement of Affairs” must be physically posted, preferably by recorded mail. Everything else may be emailed or made available online for the creditors to then access, assuming they have email.
Directors duty of care when Liquidating A Company?
- Ensure you and your team understand the company’s position, maintain contact and respond in a timely fashion to the Insolvency Practitioner;
- Maintain safety and completion of all accounting information prepared, ready for handover to the to be appointed Liquidator;
- When having meetings, take minutes of decisions, ensuring the position of the company or creditors is not additionally worsened by your actions;
- Ensure you have professional insolvency advice. Take notes of all meetings and ensure the information given maintained;
- Do be genuine, however, with all your staff and contacts;
- Assist with redundancy claims, insuring records are up to date;
- Understand the Liabilities of the company, along with Currents Assets. Ensure assets are insured and protected;
- Ensure ongoing critical issues dealt with and therefore brought to the attention of the Insolvency Practitioner on day one;
- Payment to any outstanding creditor, however considered a preference. Therefore, do not do;
- Legal proceedings against you as an individual are still dealt with and not ignored;
- Promises to creditors – Therefore, do not enter into additional credit agreements, purchase on credit from suppliers increasing debt;
- Take no further deposits;
- Cancel any HMRC time to pay agreements.
How do I liquidate my limited company – How Long Will My Company Be In Liquidation?
Usually, it takes a minimum of a year. However, the period may be longer. Liquidations may take longer when the company has substantial assets, including property etc.
Appointing a liquidator (Licensed insolvency practitioner), however, usually takes between one and two weeks. Furthermore, approving the liquidation usually requires three months. Additionally, it can take longer to determine the company’s financial position, agree on a value and dispose of assets, so that the Liquidator can, above all, and most importantly, distribute the proceeds to creditors.
How do I liquidate my limited company – Disadvantages of Liquidating my Company
Liquidation has features which aren’t so advantageous. To determine whether it’s the correct option, it’s necessary to be informed of both the advantages and disadvantages of liquidation.
- Overdrawn director’s loans pursued;
- Dividends paid when insufficient profits will require repayment;
- Liquidation cannot be stopped;
- Job losses;
- With creditors voluntary liquidation, legal restrictions exist, stopping former directors wanting to trade with a similar name. Use of the name or similar one requires clear legal advice beforehand if attempting the reuse;
- Directors who misbehaved, possibly subject to disqualification;
- Creditors will call in personal guarantees by directors;
- Investigation of how former directors operated the business;
- New company will find difficulty raising credit.
How do I liquidate my Company – Liquidating a solvent UK Company
Members Voluntary Liquidation Process?- Solvent liquidation.
- Arrange a board of directors’ meeting;
- Then prepare a declaration of solvency;
- Shareholders Meeting to agree on company solvency and closure;
- Company then placed in Liquidation with a Licensed Insolvency Practitioner;
- Prepare a deed of indemnity (Regarding repaying creditors);
- Final meeting and then wrap up.
Benefits Of An MVL
- The potential tax benefit for company shareholders through the allocation of capital;
- The appointed Liquidator then undertakes responsibility, administers with all assets and arbitrates
- Liquidation crystallises company liabilities;
- Creditors who, therefore, failed to claim, may not displace distributions paid out by the liquidator.
For further assistance with, How Do I Liquidate My Company? Please contact HBG Advisory on 0800 612 5448.
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