Closing a limited company with debts need not be a daunting process. In fact, it can be straightforward and stress free – so long as, at the outset, you employ the services of a licensed insolvency practitioner or business rescue expert.
They will guide you through the process of closing your limited company. After all, a reputable insolvency expert will have dealt with dozens of situations like yours.
They know the law, the protocols, the way the courts work and what your obligations are, as a company director or owner, during the process. They can steer you through the closing of your limited company with debts, from start to finish.
Furthermore – and equally importantly – in some cases they will be able to help you relaunch your company, unburdened by debt, allowing you a fresh start.
So what are the options available to you? Well, this depends. If possible, you should arrange the liquidation of your company. This is called a Creditors’ Voluntary Liquidation (CVL).
If you don’t then your creditors can force your company into compulsory liquidation. This is altogether different, a much more expensive and stressful way of closing your limited company with debts, as the process must go through the courts.
Here we explain the differences between the two. But before we do it is important to remember one thing: regardless of the way you close your limited company with debts, you must always put the interests of your creditors ahead of your own interest, or that of your fellow directors and your staff. This is more than a moral obligation – it is a legal one.
Creditors’ Voluntary Liquidation (CVL)
If you want to go down this route when closing a limited company with debts, it is important you get the agreement of 75% of the company’s shareholders (by value of shares owned) to wind-up the company. This is known as the ‘winding-up resolution’.
Once the resolution is passed there are three steps you must follow:
- Appoint a licensed Insolvency Practitioner. They will be appointed as your company’s liquidator, and will take charge of liquidating your company.
- Send details of the winding-up resolution to Companies House.
- Advertise the resolution in The Gazette within 14 days of the resolution.
The advantages of closing a limited company with debts are many-fold. They include:
Debts are written off:
A CVL is the best way to maximise returns for creditors. Remember, however, that if you’ve made personal guarantees when taking out loans then you will still be responsible for these debts.
Employees are able to claim redundancy pay:
Your staff will be made redundant by the liquidator, although if they are eligible they can make a claim for redundancy pay.
It’s low cost compared with other options:
You and your fellow directors will need to pay the costs of holding a creditors’ meeting and a few other sundry expenses. Remember, any professional fees you incur are paid from the sale of company assets.
It avoids going to court:
Pretty self-explanatory this one: you avoid all those expensive legal fees – and the stress and publicity a court hearing could bring.
Compulsory liquidation
Creditors can force the closure of a limited company with debts, and this is to be avoided at all costs.
The process is a relatively straightforward one – effectively, your creditors simply ask the court to order you to pay what you owe them.
They can do this by either:
- getting a court judgment.
- making an official request for payment – this is called a statutory demand.
Once a court judgment has been issued you must respond to it within 14 days (your creditors can apply to have your assets seized if you do not). Your options are to:
- pay the debt.
- reach an agreement with the creditor to pay the debt in the future, for example by using a Company Voluntary Arrangement.
- put your company into administration.
- apply to liquidate (‘wind up’) your company yourself.
- challenge the court judgment.
Your licensed Insolvency Practitioner will be able to explain which of these is the best option for you and your company.
If you receive a statutory demand you must respond within 21 days. Your licensed Insolvency Practitioner will help you do this, giving you peace of mind as you’ll know it has been done correctly.
How we can help you with closing a limited company with debts
These might seem like dark days for you and your company. You certainly shouldn’t be carrying all the worry and the burden on your own.
By employing the services of an insolvency or business rescue expert such as, then you will maximise the chances of successfully painlessly closing your limited company with debts.
With the weight lifted from your shoulders you will be free to move on to the next chapter of your career, able to face the challenges that lie ahead with renewed vigour.
Need advice on closing a limited company with debts? As industry leading experts with 40 years’ experience, we’re in the best position to help you make the best decision about your business’ future. We can also match any like-for-like quote ensuring you receive the best service for the lowest price. Speak to our team of business rescue experts and licensed insolvency practitioners about your unique situation.
