Updated: 13th January 2021
You’ve survived the process of liquidating your company and come out of the other end. Your Insolvency Practitioner has taken care of the practicalities of closing down the business, the assets have been sold off, and the company name removed from the register at Companies House. Once all the practical stuff is out of the way and you can sit down to take stock of the situation, you may find yourself battling a number of conflicting emotions and you are likely to have many questions and concerns racing through your head. Here we answer the most common ones:
There is no universal way people feel after liquidating their company. In fact it’s common to have a mixture of emotions depending on the circumstances which led up to the business closing down. The stress of fighting against a business that is failing often affects all aspects of your life, therefore a feeling of relief that it’s all over is common. You may also feel sadness that your business has ended even after you worked so hard to make it a success, and guilt towards those who may have lost out financially as a result. Some may also feel embarrassment that the business they prided themselves on is gone, and they now need to go back to the drawing board and start over.
Having to make your staff redundant can be one of the most difficult things about liquidating your company. Unfortunately making tough decisions is part and parcel of being a director, even if they may have unsavoury consequences for others. You may feel responsible for your employees’ wellbeing and worry about how they will cope once their employment is terminated. However you shouldn’t blame yourself. Often the failure of a company is due to economic conditions out of your control rather than a deliberate mismanagement of the business.
Once you have put the company through a formal insolvency procedure, your staff can claim a redundancy payment from the Government depending on their length of service. You may feel guilty but it is better doing this than carrying on and reaching the point where you are unable to pay them for the work they are doing. Be prepared to give your staff a good reference and help them in any way you can into a new job.
One of the main benefits of running a limited company is that you do not open yourself up to any personal financial risk, unless you have signed a personal guarantee. You are a separate entity from your business and therefore you cannot be pursued for any debt that the company holds, or held prior to liquidation. As soon as your company enters liquidation, contact between yourself and your creditors stop.
Creditors will have been paid through the sale of your assets as determined by a legal list of priorities. Unfortunately some will have missed out; however you are not personally liable for making up this shortfall. Put simply, the debt is company debt, and the company no longer exists.
You have done the responsible thing for yourself and your company by recognising when to call it a day. Running a business is difficult, and it is a brave decision to go it alone. While you may be nursing a bruised ego, you are not alone; survival rates for small businesses in the UK are low, with half of start-ups failing to reach their fifth anniversary.
You should remember that a failed business does not mean that you are bad at your job – a failed construction company owner is not a bad builder, nor is having a failed restaurant any reflection on your abilities as a chef. It could just be that the day to day logistics and administration of running a business is not for you, or even that the location for the business was wrong.
While some may decide that running a business is not for them and chose to return to work as an employee, for others they may be keen to start up again armed with valuable experience and lessons learnt from the failed venture. If this is the route you want to go down then it is absolutely possible. The liquidation has happened to the business, not to you; therefore you are free to start up another company whenever you like providing you have not been disqualified as a director. Disqualification is rare, and this is only imposed if fraudulent or illegal activity has taken place. In ordinary circumstances you will not be punished for the business failing.
As part of the liquidation process, your Insolvency Practitioner will have liquidised the company’s assets and used the proceeds to pay as many of the outstanding creditors as possible. Unfortunately when a company is insolvent it is not always possible that everyone gets paid what they are owed. If you are planning to set up another business and are keen to work with some of the same suppliers in your new venture, you may find yourself facing problems if they were one of the creditors that did not receive payment.
If you have built up good relationships with certain suppliers or customers, the best course of action is to contact them and explain the situation. You may be surprised how they react. Obviously this will depend on the individual concerned, and how much they may have lost as a result of your company’s liquidation. You may find they are responsive to working with you again, even if this is on slightly different terms, such as a reduced number of orders, needing to pay for stock up front rather than being invoiced etc. However you must also be prepared to accept the possibility that the liquidation has soured the relationship beyond repair. With 100 offices stretching from Inverness down to Exeter, Real Business Rescue can offer unparalleled director advice across the UK.
13th October 2021
The Bank of England has said it anticipates that rates of corporate insolvency will increase in the coming weeks following the removal of restrictions on winding up petitions.Read More