Our company isn't viable anymore and we have lots of creditor pressure. We just want to close this company down and or start again. Should we liquidate it"?
What is liquidation?
Liquidation usually means, the company's trading stops and it's assets are turned into cash or "liquidated". All other possible liabilities, like employment liabilities, landlord's rent or payments to lease companies are stopped. It really is the end of the company, but the "business" may survive if a phoenix is organised.
Liquidation is a powerful way to END creditor pressure and let you get on with your life.
There are three types of liquidation in the UK:
Creditors Voluntary Liquidation
Members Voluntary Liquidation
Now read guides below or click on Liquidation Flowchart for a quick guide.
Read our detailed guide to creditors voluntary liquidation
Get our new free Experts Complete Guide to Creditors Voluntary Liquidation re published June 2017
Creditors Voluntary Liquidation A Guide
Creditors Voluntary Liquidation is started by the directors, they tell the shareholders the company is not viable, it is insolvent and they must stop trading. The process is started by the directors holding a board meeting and recognizing that the company is insolvent and that they believe the company should be placed into liquidation.
A meeting of shareholders is convened to pass an extraordinary resolution to place the company into liquidation and to appoint a Liquidator. By law, this meeting requires 14 days notice. However, if the holders of 95% of the issued share capital all agree to accept less than the statutory notice the notice period can be waived and the company placed into liquidation immediately. This would normally be necessary if there were a need for a Liquidator to take control of the assets straight away to protect them, for example, from an unpaid creditor.
So, this is why it's called Creditors Voluntary Liquidation, it is essentially the creditors who appoint the liquidator. It's very common, quick and a very powerful way to close a business and deal with things properly. You can get on with a new business or job, the company is closed, leases cancelled and all the staff made redundant.
What does a liquidator do?
He or she runs the liquidation, fills out all the forms, calls all meetings and investigates the conduct of the directors before the liquidation. He collects assets and turns them into cash. He then works out the debts and pays the creditors from the assets, if there were any.
What if there are no assets to pay for the liquidation?
This is a common question and one that indicates the directors have failed to control the situation carefully. Look, if there are no assets to pay a modest fee for the liquidation I would ask, where have all the money and assets gone? Surely you as directors knew (or ought to have known) that the company was facing failure and you therefore should have ACTED SOONER?
Most basic liquidations cost around £3-6,000 why then has the board of directors run the company into the ground to such an extent that there is not enough in the way of cash and assets to pay for this. REMEMBER as a failed limited company the assets DON'T BELONG TO YOU!
Therefore if you have had the benefit of the assets then it makes sense for the directors to pay for the liquidation process.
What do we do as directors?
Once the company is "in liquidation" the directors have to fill out a detailed questionnaire for the liquidator. They MUST provide all of the company's books and records to the liquidator. After this there is a creditors' meeting which a director must attend. After that, very little else usually.
Can I start another company with the same name?
Warning! you must be VERY careful on this one. You must not trade with a similar name as the previously liquidated company without careful legal advice. Breaching s216 Insolvency Act 1986 (which covers this issue) is a possible criminal offence. We can guide you through this possible minefield.
Please call one of our insolvency advisors or our practitioners on 08009700539.
Can I become a director of another company if my company is liquidated?
Don't worry, you can be a director of another company (remember s216 above). But always act properly, don't take chances and think you are smarter than the law. You aren't, lots of people think they are and they often end up in personal financial trouble. Call us now, ask all the questions you want for free. Call now for advice on 08009700539.
This is a different type of liquidation. It is started by a creditor who has usually not been paid for supplies or services. The creditor will ask the High Court to hear a "Petition" to wind the company up. If the Court agrees and or the debt is not paid, then a "hearing" is held say 40-60 days later, typically in front of a High Court judge who then passes an order to wind the company up compulsorily.
This is a common tool for debt collecting, all the creditor has to do is have an overdue debt over £750 and then ask a solicitor to start the winding up process.
Facing this threat? CALL NOW. or see this guide to winding up petitions here
We can use our huge knowledge of the law to stop this process, if you have a viable company.
Most often it is the tax man (HMRC) that issues petitions, they simply want to get the taxes collected or stop you trading to stop the tax debt rising. Facing this threat? CALL NOW. We can stop a petition killing a viable company.
This is used when a company has lots of assets but no further purpose. The company assets are liquidated and turned into cash, This is then paid to creditors and shareholders. In a MVL every creditor has to get paid in full. Most often this is for rich companies with lots of assets.
A statutory declaration of SOLVENCY is required, this is an important legal process and expert advice is required. You must take care when going down the members voluntary liquidation path. Call now for advice on 08009700539.
See an experts guide to MVL here (this is a free PDF guide to the MVL process, one click to safely download it)
Did you know that only a licensed INSOLVENCY PRACTITIONER (IP) can liquidate a company? But most IP's never speak to directors, leaving this to their junior staff. Now you have read our basic guides do you want to speak to an IP today?
We could help you start the liquidation process today, please call on 08009700539 in office Hours 8.15am till 5.00pm. Or call Wayne Harrison (IP) direct on 07879 55535 or Eric Walls (IP) direct on 07787 278527.