Company Liquidation Howmore / Tobha Mòr in Howmore / Tobha Mòr
Contact UsAs scary as it may for seem for businesses, old and new, there may come a point when liquidation is the only viable option remaining. So how did you get to this point? There is a number of reasons why liquidation of a company may become a necessity, for example, it may be that your company is simply not profitable anymore – or it may be that your company has taken on too much debt and your creditors are forcing you into compulsory liquidation.
Whatever the reason, we can help guide you through the process and give you all the information you may need to get the ball rolling.
What Does Liquidation Mean?
So, what exactly is liquidation and what does it mean for you and your company? Well, quite simply, liquidation (sometimes known as a winding up order) is a process that sees a company brought to an end – with its assets and property then being redistributed in order to pay off its debts.
You will find three different types of liquidation, two voluntary and one compulsory, but we’ll have more on that later – however, the end goal of all three remains the same – to bring your business to an end. If you’re unsure of what type of is suitable for your company, don’t worry, we will do all we can to help and guide you through the process.
How to Liquidate a Company
If you’re feeling a little overwhelmed and don’t know where to start, don’t worry, we can talk you through the process of liquidating a business – but here’s a brief overview.
When liquidating a company, there are generally five main steps to follow in order to complete the process. Firstly, an insolvency practitioner will be appointed as Liquidator and it is their job to oversee the whole process and ensure it runs as smoothly as possible for all involved parties.
Secondly, all of the company’s assets are then assessed and liquidated. Next, creditors will then be paid what they are owed (or an agreed upon amount) in order of priority. Then, any surplus cash remaining will then be distributed to the directors accordingly. Finally, the company is dissolved and is the struck off the registrar of companies and Companies House, meaning it will no longer be able to operate or trade.
Types of Liquidation
There are currently three types of liquidation available to companies – two voluntary processes and one compulsory process.
· Firstly, there is the voluntary liquidation of an insolvent limited company. This type involves the dissolution of the business and sees it assets redistributed to its creditors. This is generally seen as a last resort for companies, but it can also be a rational decision that may not necessarily mean the end of the business, as it enables directors to write off unsecured debts that have not be guaranteed personally.
· The second form of voluntary liquidation is that of a solvent limited company. Otherwise known as a Member’s Voluntary Liquidation (MVL), this is generally considered the fitting way to liquidate a company and can even be used as part of an exit strategy. Reasons for considering an MVL may be that you are looking to reduce taxation by closing your company as part of a business plan, or your business may simply be coming to an end naturally. You must consider, however, that to be eligible for an MVL, a declaration must be signed confirming that there are no remaining creditors (including HMRC).
· Finally, there is compulsory liquidation of a company. This is considered the most severe of all three types – as it is usually initiated by a creditor that is aiming to force to company to liquidate, usually in the form of a court order. It’s safe to say, you may not be too happy with your business being forced into closure, but do bear in mind, this is generally a last resort by creditors, probably after several unsuccessful negotiations over missed payments etc.
If you do find yourself in this situation, do be aware that your conduct during this process will be reported to the Secretary of State at the end of proceedings and if you have failed to cooperate, there may be some pretty serious consequences.
Liquidation Process UK
Here in the UK, there are several things that need to be considered before the liquidation process can even begin. For example, directors must meet to pass a resolution to convene a general meeting for liquidating the company, per the Companies Act 2006.
When the meeting is agreed, all creditors must be notified at least seven days before said meeting is due to take place and an advert must be placed in The Gazette within 14 days. A statement of affairs must then be drawn up by the directors, to prevent at the meeting. After the meeting has taken place, one director must then be chosen to formally represent the group at the meeting with the creditors.
You may be wondering how long the UK liquidation process will take, in regards to winding up your business. But, the truth is, there is no accurate answer for this, as each case is unique and it generally depends on the size and complexity of the business – as well as its debts, assets and property.
It’s also worth noting that if you were the director of a company in compulsory liquidation or creditors voluntary liquidation, you will be banned from forming, managing or even promoting a business that has the same name, or a similar name to your liquidated business – unless you have been granted permission to do so by the court.
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We appreciate that all of the above may seem like a lot to digest, at an already stressful time if you are going through, or considering going through liquidation of a company, be it voluntary or involuntary. However, you can rest assured that the insolvency services we offer are here to help and assist you in getting the best possible outcome for yourself and your business.
We cover Howmore / Tobha Mòr (Western Isles)