The quick answer
The main reason to liquidate an insolvent company is to make it to close down. The main advantages to doing this are:
- Creditors should stop chasing you for money.
- As a directors you can go off and do something else.
- Employees will be able to claim redundancy.
- There is no longer a need to file vat and PAYE returns or accounts.
- It stops the business losing money.
In more detail
Liquidation will mean that a liquidator takes over and deals with you creditors.
Unless you have personally guaranteed a creditor you probably will never have to speak to them again. In addition, your obligations to file accounts and returns at Companies House will come to an end. You also no longer have to fill in tax, employer or vat returns with HM Revenue and Customs.
If you have employees who are owed money it means the government will step in and pay your staff in particular their redundancy claims, pay in lieu of notice and arrears of pay. These pay outs can be substantial. These payments are made by the Government run Redundancy Payments Service.
If you know you cannot pay back your creditors and that continuing to trade may make the position worse then you should stop trading and liquidate your company. In these circumstances you may be personally liable for future debts if you just carry on as the financial position gets worse.
Although liquidation can be a huge relief when it finally happens you will still need to help the liquidator fulfill his or her role, although the time needed to do this does tend to reduce quite quickly.
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If you would like to know more about liquidating your company and the process involved, contact us today for confidential and impartial advice.