How do I Liquidate my Limited Company?
How do I liquidate my limited company? Simple!
Liquidating, your company closes your limited company officially. However, the process involves disposing of all the company assets and removing it from the register at Companies House.
The difference between liquidation options?
Which then business rescue option depends on whether your limited company remains solvent or insolvent.
Is your company under creditor pressure?
What are my closure options?
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 it’s 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 the priority of the company’s creditors over that of shareholders.
Two ways exist liquidating an Insolvent Company; the most common way remains, however, Creditors Voluntary Liquidation.
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 putting the company into Liquidation. Therefore:
1: A Directors’ meeting
Directors call a meeting to agree on the company Insolvent and require Liquidating. They also decide on who to act as “Liquidator”.
2: A Shareholders’ meeting
A shareholder meeting then passes a special resolution to place the company into Liquidation. A 75% majority required. A minimum notice of 14 days’ notice, however, must be allowed in writing to the shareholders when calling a meeting. However, if 90% agree, meetings arranged immediately.
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.
Costs and Fees to Liquidate a Company?
To Voluntary liquidate your limited company remains an efficient way to close an insolvent business. But, costs may dissuade company directors from the process, and as a result compounding the financial problems of the business.
Initial cost for the process ranges from £3000 through to £5000 plus Value Added Tax in order to 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” 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 posted physically, preferably by recorded mail. Everything else may be either emailed or made available online for the creditors to access, assuming they have email.
Directors duty Of Care When Liquidating A Company?
- Ensure you and your team understand the company’s position and maintain contact and respond in a timely fashion to the Insolvency Practitioner.
- Maintain safety and completion of all accounting information made ready for handover to the, to be appointed Liquidator
- When having meetings, take minutes of decisions made ensuring the position of the company or creditors 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 completely honest, however, with all of your staff and contacts.
- Assist with redundancy claims ensuring records are up to date.
- Understand the Liabilities of the company, along with Currents Assets. Ensure Assets insured and protected.
- Ensure ongoing critical issues dealt with and brought to the attention of the Insolvency Practitioner on day one.
- Payment to any outstanding creditor 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 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 such as property etc.
Appointing a liquidator (Licensed insolvency practitioner) however, usually takes between one and two weeks. Furthermore, approving the Liquidation, however, usually requires three months, additionally though, it can take longer to ascertain the company financial position, agree on a value and dispose of assets so that the Liquidator may above all and most importantly, distribute the proceeds to creditors.
Disadvantages of Liquidating my Company
Liquidation has features which aren’t so advantageous. To determine whether it’s the right 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 a creditors voluntary liquidation, legal restrictions exist stopping former directors wanting to trade with a similar name. Use of the name or a 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 as to how former directors operated the business.
- Newco 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 then contact HBG Advisory on 0800 612 5448.
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