Is your company under pressure from its creditors? When your company’s debts are too great to repay and its creditors are pressuring you with the threat of compulsory company liquidation, winding up voluntarily could be your best option.
Company liquidation allows you to put an end to all of the stress of dealing with demanding creditors. It also lets you prevent the risk of personal liability.
It will however, mean the end of your company, as its assets will then be liquidated (sold in order to raise cash) to repay creditors. If your company is still commercially viable, an alternative option (such as a CVA) may be a better choice.
If your company is under pressure from its creditors and you do not believe it has a viable future, your best option may be to cease trading and liquidate the company’s assets voluntarily.
This is done via a CVL – Creditors’ Voluntary Liquidation (the most popular form of company liquidation in the UK). It significantly reduces the risk of directors being accused of fraudulent trading during the liquidation investigation process:
Although a CVL will result in the end of your company, it gives you a greater level of involvement during the liquidation process. Your company’s directors will have the professional assistance of an insolvency practitioner throughout the process.
If your company is still solvent (able to repay its existing and contingent debts with current assets and cash flow) but is under pressure from creditors, you may be able to enter into a Members’ Voluntary Liquidation (MVL).
A MVL offers numerous tax advantages for directors and shareholders interested in closing their company and extracting its assets. Value can be extracted via a lump sum to be distributed amongst shareholders.
In many cases, a MVL is the most tax-efficient way to liquidate your company and extract its assets, even if it is not under pressure from creditors.
In order to enter into a MVL, your company must be solvent. Entering into a MVL knowing that your business is insolvent is a serious offence and directors of your company could face criminal charges.
Does your company have outstanding debts of £750 or more? If your company has not paid its creditors on time, it could face one or more creditors filing for compulsory company liquidation.
Creditors can issue a winding up petition – a legal document seeking company liquidation – if they are owed more than £750 and have not been repaid upon issuing a statutory payment demand to your company.
Your company’s creditors can also issue a winding up petition if they have an unpaid County Court Judgement (CCJ). If the winding up order is granted, your company will be dissolved and its assets will be liquidated in order to repay its creditors.
Entering into compulsory liquidation is generally not desirable for your company, as it gives directors limited control over the company’s future. Most companies facing a threat of compulsory liquidation choose other options to recover their business.
These options include a Company Voluntary Arrangement (CVA), which is a legally binding agreement between the company and its creditors to repay its debts over a certain period of time. Others enter into administration to avoid legal action.
If you believe your company could get back on track in the future, liquidation is likely not the ideal solution for you.
Our expert insolvency practitioners have helped hundreds of business owners wind up their companies voluntarily. We’ve also assisted hundreds of directors in getting their companies back on track following insolvency or a cash flow crisis.
We can offer detailed, personalised assistance so contact us today to see how your business can make a full recovery.
We have a team of advisers who have helped hundreds of businesses around the UK that have faced financial pressures on every scale. You are not alone.