Simple steps to liquidate your company If your company is insolvent, before making the decision to stop trading and liquidate consider all of the rescue options available. However if closure is the only way forward, then appointing the right liquidator to protect the interests of the directors is important.
Liquidation is used to close a company for good. The process is quite simple, but it is important these are followed to protects the interests of the directors of the company.
To start the liquidation process, it is necessary for company directors to employ the services of an insolvency practitioner. They are likely to charge at a minimum around GBP5000 for the liquidation including the required advertising costs. If the company is insolvent then this will have to be paid for by the directors.
Where the company is insolvent the first job for the insolvency practitioner to do will be to call a creditors meeting to appoint a liquidator. Usually the creditors will appoint the liquidator suggested by the directors. If the company's bank is a major creditor they may suggest the appointment must come from their approved panel.
What about just leaving the company for my creditors to wind up?
Given the cost of liquidation, a common question is whether it would not be better just to leave the company and wait for one of the creditors to take action to wind it up.
The major issue with this is that the directors will have no control over the appointment of the liquidator.
Once appointed, over and above the sale of the company's assets the liquidator is required to carry out an investigation of the conduct of the company directors and report this to the insolvency service.
If a hostile creditor is left to appoint the liquidator, it is likely that they believe that the directors have been involved in trading the company when it was insolvent. They will want the liquidator to confirm this and accuse the directors of wrongful trading.
If a director is found to have knowledgeably allowed a company to trade while insolvent, they could be made liable for the company's debts and stopped from acting in the capacity of a director of other firms in the future.
If the directors have recommended the liquidators appointment, this is far less likely to happen.
Alternatives to liquidation
Before making the decision to close an insolvent company, the directors should consider whether there may be a better alternative which will allow the business to continue to trade profitably.
The two solutions most commonly considered are a company voluntary arrangement (CVA) and pre pack administration. Both of these solutions will considerably reduce or write off the company's debts altogether.
Such action together with the possibility of refocusing the company's strategy often allows the business to remain open saving jobs and protecting value for the shareholders.
If your company is insolvent, before making the decision to stop trading, it is first important to consider all of the rescue options available. However, if closure is the only way forward, then appointing the right liquidator to protect the interests of the directors is extremely important to reduce their potential liability for the company's debts.
What happens to the directors if a company is wound up?
Once a company is being wound up a Liquidator will be appointed. The liquidator will undertake an investigation into the conduct of the directors to see whether they have knowingly allowed the business to trade while insolvent thus making the creditor's position worse. If this is the case, a director may face being disqualified and held personally liable for the company's debts. As a Director we look at the options you have.
What will having a County Court Judgement do to my company
If a county court judgement remains unpaid, this could lead to more serious action being taken against the business. We look at the impact and what you can do.
Company debt restructure to improve cash flow
Ensuring that enough cash is available to maintain their business must be a priority for companies. Those that do it well will survive. Those that do not are likely to fall. As such identifying problems and implement solutions which may require a radical restructuring of debt must be a priority. We discuss some of the solutions available.
