Closing Down

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Advantages Of Liquidating An Insolvent Limited Company 

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Advantages Of Liquidating An Insolvent Limited Company 

Liquidating a solvent company with a CVL is not the preferred route to close down a limited company. If the company operates business that can be restructured then directors should consider an Company Administration or a Company Voluntary Arrangement. For further help, please contact HBG Advisory on the contact details detailed below.

Creditors’ Voluntary Liquidation(CVL)

A CVL remains one of the two types of Liquidation used to close a limited company in England and Wales. A CVL commences once the company directors receive shareholders’ approval to place the company into Liquidation voluntarily without pressure from court enforcement. Usually, it may no longer pay its creditors as an insolvent company as and when they fall due.

Compulsory Liquidation

When a creditor of the company applies to the court to liquidate the company for unpaid debts.

  • HMRC discontinued further action for arrears of TAX by the company;
  • That is the end of the matter for an insolvent company battling to survive in a legal and regulated manner;
  • The creditors of your company may then claim VAT back on the debt owed;
  • All county court judgments or pressure on the recovery of claims stop without recognising the directors’ debts;
  • Employees will be able to claim any unpaid salary, holiday pay, notice pay, and redundancy from the government fund. However, this is subject to some limits;
  • If creditors pressure the company, the company can therefore then be closed down, and all creditors remain dealt with by the appointed liquidator;
  • It takes duty away from the business owners and directors;
  • Once the Liquidation is complete, directors will therefore then no longer need to file annual financial statements, VAT returns or tax returns;
  • The directors’ responsibility to deal with creditors removed, although personal guarantees require settling outside of the Liquidation;
  • Former Directors of the liquidated company can find another job or set up another company.
  • Liquidators can cancel leases. Leasing and lease-purchase agreements terminate at the time of Liquidation. No further payments are required if payment arrears arise. The company that makes the goods lease able can claim them from the insolvency practitioner concurrent with other company creditors. 
  • Comparatively, low costs to perform a liquidation. Directors remain required however, to pay the pre-insolvency fees associated with preparing the statement of affairs and arranging if voted for a physical meeting of creditors. Once the liquidator is appointed, their costs are paid for by selling company assets and other items, including debtor collection.
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