Does every day bring a new threat from creditors? Are your company debts too large to repay? Is the spectre of forced company liquidation hanging over your head? If so, then voluntarily winding up may be your best option going forward.
With company liquidation you can free yourself from the stress and distractions of dealing with aggressive creditors. Company liquidation also affords you the ability to protect yourself from personal liability.
What it will not do is save your company, since those assets that belonged to the company will be sold off in order to repay creditors. So if saving your company is of paramount importance to you and you still have a predictable cash flow, you may want to explore alternatives to company liquidation, such as a Company Voluntary Agreement or CVA.
This type of liquidation is voluntarily undertaken by a company that has come under pressure from creditors to square outstanding debts, even though it is still solvent with enough assets and cash flow to remain a viable enterprise.
The MVL provides a number of tax advantages for directors and shareholders who wish to wind up their company and extract assets. This is typically done via a lump sum which is then distributed amongst the shareholders.
The MVL is often the most tax-effective method for liquidating a company and extracting its assets, even if the company is under no extraordinary pressure from creditors to do so. Be aware, however, that if you enter into an MVL knowing your business is in fact insolvent, you could wind up facing serious criminal charges.
If you are feeling the heat from creditors and have reason to believe your company does not have a viable future you may want to enter into a CVL or Creditors’ Voluntary Liquidation. With this form of liquidation you can reduce the risk of directors facing accusations of fraud during the liquidation investigation process. This is likely one of the reasons why it is currently the most popular type of company liquidation in the UK. With a CVL:
Another reason for the popularity of the CVL is that it provides for a greater level of involvement by directors in the liquidation process. But make no mistake; it will result in the end of your company.
If your company has outstanding debts in excess of £750 and has kept creditors waiting for settlement of those debts, the creditors may file for compulsory company liquidation. Compulsory liquidation can be ordered by the court if the creditor or creditors have issued a statutory payment demand which has gone unheeded by your company. Another possible way compulsory liquidation can be triggered is if the creditor or creditors have an unpaid County Court Judgment or CCJ. Should the winding up order be granted, your company will be forcibly shut down and its assets seized and liquidated to repay said creditors.
Compulsory liquidation is the least desirable of the liquidation options, as the court tends to view you as an unwilling participant in the settlement process and imposes strict controls on company directors. Typically companies faced with the possibility of compulsory liquidation seek other avenues that will allow them to recover their business. One of those possible options is the Company Voluntary Arrangement or CVA. The CVA is a legally binding agreement wherein the company agrees to repay its creditors within a specified amount of time. Other businesses will opt for some form of administration in order to avoid legal action.
Keep in mind that if what you seek is a solution that will enable your company to transcend a difficult period company liquidation is likely not the answer. If, however, company directors have determined that some form of liquidation is needed, our insolvency experts will assist you in determining which type of company liquidation is right for you.
So whether you are looking to get your company back on the straight and narrow following insolvency or you need to explore company liquidation options, we’ll work closely with you to find the appropriate business solution. We’ve helped scores of UK businesses make full recoveries and return to solvency, so contact us today to learn more about the full range of options before you.
When creditors are bringing financial pressures down upon your business, remember expert and qualified advice is always available from TruSolv. Talk to us in confidence.
Call us on 0808 196 8676 for a free, confidential chat and let us help you sort things out.
We have a team of advisors who have helped hundreds of businesses around the UK that have faced financial pressures on every scale. You are not alone.
Research from Barclays has found that 58% of SMEs are...
The latest company insolvency statistics have been...