Reviewed: 16th June 2017
If your company has entered insolvency and there is no hope of returning to profitability, you will need to repay your creditors as far as possible and close down the business. A voluntary liquidation process can be costly, however, and you may not be able to afford the professional fees required.
So are there any other options under these circumstances?
It is not widely known, but limited company directors may be able to claim redundancy pay and other employment entitlements under certain conditions. To be eligible you must:
The average redundancy payout is £12,000, so if your claim is successful this money could potentially pay for an insolvency practitioner to administer the liquidation process.
Liquidation via a winding-up petition from one of your creditors would result in the enforced closure of your company. HMRC tend to instigate compulsory liquidation procedures when a company get into arrears with tax and National Insurance, particularly if a Time to Pay arrangement has failed. They don’t need to have issued a CCJ or statutory demand prior to the winding-up petition, so the process is relatively fast.
This is clearly not the ideal outcome for most businesses, but in your circumstances it could help the issue of payment, although there are significant downsides. These include increased scrutiny of your actions leading up to the company’s insolvency by the Official Receiver (OR).
The OR will investigate the reasons why your company has entered insolvency, going back several years to look for instances of misconduct or unlawful trading. Further action could be taken against you if this or any ‘antecedent transactions’ are discovered.
Antecedent transactions include making preferential payments, selling or transferring assets at an undervalue, and wrongful trading. Antecedent transactions can be reversed if they were made when the company was insolvent, or are found to have caused the insolvency, and assets can be recovered by the liquidator for the benefit of company creditors.
You could face serious allegations of misconduct, as well as personal liability for some or all of the company’s debt.
By allowing a creditor to forcibly wind up your company, directors lose any influence over the liquidation process, including who is appointed as liquidator, and when the company is actually placed into liquidation.
The other liquidation option, Creditors’ Voluntary Liquidation (CVL), allows you greater control over the closure of your business, with investigations into director conduct being less aggressive.
You may be able to strike off your company at Companies House, a process also known as company dissolution. The business must not owe any monies, however, as creditors can demand that it is restored to the Register of Companies at a later date to recover their money.
If you are concerned about the cost of closing your company and would like more detailed advice, Real Business Rescue can help. We are insolvency specialists with vast experience of the liquidation process, and may be able to offer alternative courses of action or come to an arrangement regarding fees.
Call one of our licensed insolvency practitioners for a same-day meeting free-of-charge. We work from a network of offices around the country, and can arrange a consultation near your location.
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