There’s no easy answer when it comes to the question of whether or not to liquidate your company. On the one hand, liquidation can provide a fresh start for your business, freeing you from the debts and obligations that have been weighing it down.
On the other hand, liquidation can be a risky and uncertain process, with no guarantee of success. Alternatively, you maybe thinking about a change of career path or retiring so the business may no longer be needed.
Before making a decision, it’s important to weigh all of the potential pros and cons of liquidation carefully. Only by doing so will you be able to make the best decision for your company’s future
What are the options for liquidating my company?
If you’re considering liquidating a limited company, there are a few different options available. One option is to simply sell off all of your assets pre liquidation and close up shop. This can be a quick and easy way to close the business if there are no debt attached to the business, if the business is carry debts you will need to liquidate.
Another option is to negotiate with your creditors. This can be a lengthy process, but it may allow you to settle your debts for less than what you owe.
Finally, if you are a limited company you could file for insolvency. This would give you some protection from your creditors, without having an impact on your personal credit score.
Ultimately, the best way to liquidate your company will depend on your individual circumstances.
How do I liquidate my company? Can I liquidate my own company?
In order to liquidate your own company you will need the services of an insolvency practitioner.
Although both MVLs and CVLs require directors to initiated the process, this means you are the one who is taking the decision to place your company into liquidation, you are unable to liquidate your limited company yourself.
If you have decided to explore the liquidation of your business, your first step is to seek advice from a licensed insolvency practitioner. They will talk you through your options and ensure liquidation is appropriate for your company’s situation and future outlook.
If it is deemed that liquidation is the best solution, the appointed insolvency practitioner will handle the whole process on your behalf, including dealing with outstanding creditors and ensuring the company is wound down in an orderly manner.
What happens when I liquidate my company?
MVL or CVL, both processes require expertise and guidance of a licensed insolvency practitioner (IP). It is simply not possible for you to liquidate your limited company without one. Therefore, the first step is to seek professional help.
Once appointed, it is the role of the insolvency practitioner to “liquidate” the assets of the company and so turn them into cash to pay the stakeholders such as shareholders/members and creditors.
All assets are valued and then the insolvency practitioner arranges the selling of these, in return for capital that is used to pay off the creditors owed. Note that creditors will be paid in priority order, and the IP will be sure to settle their own cost too.
When you liquidate your company, it means that you are essentially shutting it down. This can be a voluntary decision on your part, or it may be forced upon you by creditors. Either way, the process will involve selling off all of your assets and using the proceeds to pay off your debts.
Once your debts have been paid, any remaining assets will be distributed to shareholders. If you are the sole shareholder, then you will keep any remaining assets.
Those lower down in the order of priority may be left out of pocket as a result, depending on the difference between the amounts realised and that owed. Remember, as the company is limited, any debts after realisation are wiped, unless any personal guarantees are involved and then responsibilities may in some way alter.
Liquidating your company can be a complicated and time-consuming process, so it is important to seek professional help if you are considering this option.
What happens after I have liquidated my company?
Once the insolvency practitioner has liquidated your company, it will be removed from the register of companies held at Companies House. The company will cease to exist as a legal entity.
If there are no concerns raised by the appointed insolvency practitioner regarding the conduct of the company’s directors in the time leading up to it becoming insolvent, they will not face any penalty or further action regarding the company’s liquidation.
Directors will also not be held liable for any outstanding company debt, unless it has been secured with a personal guarantee.
If all actions were correct, the director(s) are free to set up another company but note there are some rules to follow if setting up in the same or a similar industry, the insolvency practitioner will also offer advice on the re-use of company names as well as ‘phoenix companies’, for ultimate protection.
Do I have to pay to liquidate my company? What if I can’t afford this?
You have to pay to liquidate a company, if you cant afford it there are a number of options that an insolvency practitioner maybe able to assist you with.
Sale of assets
Asset sales are a complex and often controversial topic. On the one hand, selling assets can be a way to raise much-needed cash quickly. On the other hand, it can be seen as a desperate measure that should only be used as a last resort. As with any major decision, there are pros and cons to asset sales that should be carefully considered before moving forward.
One of the main advantages of asset sales is that they can provide a company with a much-needed infusion of cash. This can be particularly helpful in times of financial difficulty, allowing a company to avoid taking on debt or going bankrupt. Additionally, asset sales can be used to strategically divest from non-core businesses or raise funds for new initiatives.
However, there are also some significant disadvantages to consider. For example, selling assets can represent a loss of potential future revenue and may send negative signals to shareholders and customers.
Additionally, it can be difficult to find buyers willing to pay fair value for assets, which can lead to losses in the short term. Ultimately, whether or not to sell assets is a decision that should be made based on the specific circumstances of each company.
Read more: Cheapest way to liquidate a company
Personal funds
One of the most difficult decisions a business owner may have to make is whether to liquidate their company. This is often a last resort after all other efforts to save the business have failed, and it can be a very costly process.
In many cases, business owners will use personal funds to finance the liquidation, in order to avoid putting the company into debt. This can be a risky decision, as there is no guarantee that the company will be able to repay the money.
However, it can sometimes be the best option for ensuring that the company is able to pay its debts and protect the owner’s personal assets.
Redundancy claim
Redundancy for directors works much in the same way as redundancy for employees. As you are classed as an employee and director of the company you can make a redundancy claim.
The monies you will receive can pay towards the effective closure of the business as well as paying the insolvency practitioners fees that they are entitled to for the work they have carried out on your behalf for liquidating the company.
Read more: How long does liquidation take
How can we help?
If you are looking at placing your business into liquidation its important you seek professional advice at an early stage. We are happy to discuss your options available to you as a company director as well as discussing whether liquidation is the right option.
Simply call our place an online enquiry ignorer for someone to make contact.
With over three decades of experience in the business and turnaround sector, Steve Jones is one of the founders of Business Insolvency Helpline. With specialist knowledge of Insolvency, Liquidations, Administration, Pre-packs, CVA, MVL, Restructuring Advice and Company investment.