Firstly the objective should be to avoid bankruptcy at all costs if you have a viable business. This is possible by using a Voluntary Arrangement or by early negotiation with key creditors.
Find out more…
- Bankruptcy in Detail
- Statutory Declaration of Solvency
- The Members Voluntary Liquidation Process
- Using Kirks for your MVL
- A Word of Advice
Bankruptcy in Detail
Bankruptcy usually refers to a sole trader or partner in a business who is made bankrupt. Sometimes it is used as a generic term to describe business failure.
It is worth seeking good professional advice from a licensed insolvency practitioner before going bankrupt to see if there are other options. Your accountant or solicitor can usually recommend one.
Bankruptcy can happen in two ways; the first is someone making you bankrupt and the statistics say that the person most likely to do that is the tax man (HM Revenue and Customs). The second is where you pay the Court fees (about £750) and make yourself bankrupt.
Sometimes bankruptcy is the best option. For example where it is clear that the business is not viable it is a useful way to draw a line under the old business and legally stop bailiffs entering your home to remove assets. It also means that after 12 months your bankruptcy ends and the pre-bankruptcy debts are written off.
One of the main reasons to avoid bankruptcy is that if you have equity in your home it may be sold to pay your debts. This applies even if it is jointly owned with your spouse or you have young children. Again it is important to get advice early on as you may be surprised what can be achieved.
Statutory Declaration of Solvency
A Members Voluntary Liquidation (MVL) should only be used where all creditors including HM Revenue and Customs have been paid in full or will be paid in full within 12 months from the date of liquidation.
The liquidator will ask the directors to sign a statutory declaration of solvency and warn them that it can be a criminal offence to sign a declaration knowing that creditors cannot be paid out in full within 12 months.
“A Members Voluntary Liquidation should only be used where all creditors have been paid in full or will be paid in full within 12 months from the date of liquidation.”
The Members Voluntary Liquidation Process
The insolvency practitioner will draft all of the paper work and ask for the director’s help in preparing the statement of affairs (balance sheet). A date is then agreed for the proposed liquidation to take place.
You do not need to hold a creditors meeting to put a company into Members Voluntary Liquidation. You do however, have to call a shareholders’ meeting with at least 14 days notice unless at least 90% of the shareholders have consented to short notice. In that case the meeting can be held right away.
Once in liquidation, the liquidator is responsible for the company. They will take charge of the assets and bank account and agree any final creditor’s claims.
The liquidator will then make a payment to the shareholders based on the net assets left in the company. The liquidator may pay the majority of the money out leaving a small balance to pay when the MVL is closed.
MVLs normally last a short period of time and no more than 12 months.
If a MVL lasts over 12 months and there are creditors who have still not been paid, then the case will be converted to a Creditors Voluntary Liquidation. This has serious consequences for the directors (it may be considered a criminal offence) and is also likely to mean the liquidators fees will increase substantially.
Key points to using Kirks for your MVL
As experienced and licensed insolvency practitioners we are expertly equipped to deal with Members Voluntary Liquidations and have found the following very important to our clients:
- We will pay the shareholders out fast – usually within seven days*
- Aim to get you to do most of the work in order to reduce our fees
- We can fix the fee for liquidation
- We will charge for the insolvency bond and statutory adverts
- We don’t charge for letters/stamps/storage boxes
*We will need your accountant to confirm the company tax bill to do this.
A word of advice
It is a criminal offence for directors to sign a statutory declaration of solvency knowing that they cannot pay creditors in full within a 12 month period.
If you would like to know more about Members Voluntary Liquidation contact us today. We can help you find a positive outcome whatever your situation.