As a business owner with many financial challenges to tackle, you may find yourself struggling to stay afloat. At this point, liquidating an insolvent limited company through a formal process may be the most strategic option.
Working with an experienced licensed insolvency practitioner will help you navigate the liquidation process efficiently while complying with all legal requirements. It might also be possible for you to liquidate your company and start your business again, which could put you in a better position to succeed with your next entrepreneurial venture.
If you’re deciding whether to liquidate your company and start again, there are important steps to take to give yourself the best chance of future success.
Deciding if liquidation is right for you
Liquidation is a formal process that involves closing down your company and using its assets to pay off its debts. For insolvent companies, the method of voluntary liquidation available is Creditors’ Voluntary Liquidation (CVL).
Before deciding to liquidate, you should seek expert advice and carefully consider all the options available to you to decide whether liquidation is the best path forward for your business.
You might benefit from these aspects of liquidation:
- It provides a structured way to bring your company to an end if it’s no longer financially viable. This can help minimise further losses.
- Your creditors are repaid from the proceeds of liquidated assets, to the extent there are funds available. This provides an equitable distribution.
- We could help you to make a fresh start afterwards.
But you need to be aware that:
- Liquidation means the end of your company as you know it. Your licensed insolvency practitioner will take control of it and you won’t be able to continue trading in that company.
- Assets have to be sold at market value. However, the proceeds may not cover all debts owed.
- Employees will lose their jobs unless the business continues through another company. Directors have duties to consult them in a fair manner, which we can help you with.
The Creditors’ Voluntary Liquidation process
Liquidating your company to start again involves formally closing down and dissolving the company. It’s a legal process with defined steps and timeframes.
These are the key steps in the liquidation process, which we’ll help you to navigate:
Directors’ meeting: The directors must hold a meeting to decide to liquidate the company.
Shareholders’ meeting: A meeting of shareholders is called to pass a special resolution to liquidate the company voluntarily. At least 75% of shareholders must agree.
Notice to creditors: A notice of the proposed liquidation is published in the Gazette. The creditors must also be notified and their opinion sought.
Meeting to appoint a liquidator: The shareholders appoint a licensed insolvency practitioner as liquidator. Our role is to sell assets and distribute proceeds to creditors.
Dissolving the company: Once the liquidation is complete, we’ll apply to strike the company off the register at Companies House. This formally closes the company.
Your duties as a director
When a company goes into liquidation, all the directors continue to have a number of legal duties and responsibilities. It’s important you understand these requirements and act accordingly throughout the liquidation process, so that you can start afresh with a clean slate.
Some of the key duties include:
- To cease trading. Once the liquidation process formally begins, you must immediately cease trading.
- To act in the interests of creditors. This means taking actions that result in the creditors being left in the best position possible.
- To assist the liquidator. This includes providing the liquidator with any company documents, records and information requested.
- Not to remove company property or funds for personal benefit, or to give certain creditors preferential treatment over others.
- To ensure all company records and documents are preserved and available.
Starting again
When handled correctly, a CVL can be used to restart your business under a new company as part of the process of the business continuing. Having paid off as many debts as possible with your liquidation, this is a chance to start again.
There are certain rules that must be followed very carefully, which is why a licensed insolvency practitioner’s involvement is crucial.
We call this a Start Afresh Liquidation. This process gives your business a second chance, enabling it to get back into a healthy position free of historic debts.
Need help with the question ‘Can I liquidate my company and start again?’
Liquidating a company is sometimes the most viable option in certain situations. Understanding the pros and cons can help business owners make an informed decision.
If your company’s debts exceed its assets and there’s no potential turnaround, liquidation provides a legal process to shut down operations. It also means that your creditors are able to get the fairest treatment.
It’s our role as your licensed insolvency practitioner to help you make the best decision for yourself, your creditors and your future.
To talk your options through with a qualified professional and expert, contact our team.
