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Liquidation

do you need to close down your limited company?

The quick answer

The usual way to do this is by a liquidation called a Creditors Voluntary Liquidation. We do all the paperwork for you and the process takes about ten days.

In more detail

Liquidation is the proper way to close down an insolvent business that cannot be rescued. It means the company will stop trading and any shops, offices, workshops or factories will be closed down.

The directors appoint a Licensed Insolvency Practitioner, like us, to carry out the closing down process.

All the employees will be made redundant and it allows the employees to claim from the Government Redundancy Fund.

The company fixed assets and any stock will be valued by a qualified agent and will be sold off as a private treaty sale or by auction.

We write to all creditors (so suppliers, VAT, PAYE, business rates, banks and any finance companies) so they start to deal with us.

The overall purpose of liquidation is to get in and sell the assets to pay back some or all of the money owed to the creditors.

Once you instruct us we will and take the pressure off you and deal with your creditors.

Liquidation is a three stage process:

  1. First the directors decide by a majority to liquidate.
  2. Then 7 to 14 days later a decision is put to a meeting of shareholders. They can vote by post or meet online instead of a physical meeting.
  3. On the same day the creditors then vote on the liquidation. This can be by virtual online meeting. It can also be by deemed consent which means it happens if no one holding more than 10% of the claims votes against the liquidation.

Who decides on the liquidator?

Creditors Voluntary liquidation is a three stage process. It is normal for the person the directors chose to be the liquidator unless the shareholders or creditors object. They can nominate a different liquidator if they want to.

What does it cost?

We normally agree a fixed fee to liquidate a company which covers putting the company into liquidation and notifying all the creditors. This is often between £3,000 and £5,000 plus vat.

There is then a second part to the fee post appointment which we must agree with creditors for the work we do. This is usually reported to creditors as a fee forecast estimate that they vote on to approve. We will also recover any direct disbursements  such as statutory advertising.

Creditors voluntary Liquidation - why do companies use it so often?

The main advantages to go into liquidation are:

  1. It stops creditor pressure and is the proper legal ways to close down and insolvent company. Creditors have to deal with us not you.
  2. Unsecured creditors such as VAT, PAYE, suppliers, business rates an unsecured loans are written off. However be careful if you have given personal guarantees.
  3. All employees are made redundant and can claim from the Government Redundancy Payments Fund for: arrears of wages (up to 8 weeks), holiday pay (up to 6 weeks), redundancy (up to 30 weeks pay dependent on length of continuous employment and pay in lieu of notice (up to 12 weeks for 12 years worked). Note that there is a pay cap of £538 per week.
  4. Employee rights normally end on liquidation and can not be transferred to a successor business.
  5. The company assets are valued and sold by the liquidator usually with the help of an auctioneer or specialist agent. They can be bought back by the directors at market value.
  6. There is no more need for you to: pay for annual accounts, complete VAT returns, do PAYE returns or file any forms at Companies House.
  7. It stops the trading losses getting any worse.

The main disadvantages are:

  1. The company can no longer trade and loses its assets.
  2. Damage to reputation – although it is not normally registered against the directors credit rating unless they default on personal guarantees.
  3. If you have an overdrawn directors loan account you will have to pay it back.
  4. If you have acted improperly as a director you may be liable for Wrongful Trading – although this was suspended due to the Coronavirus on the 1st March 2020.

If you want to find out more just call or email me and ask any question. If you want a meeting we can do this by Zoom or Teams.

Creditors voluntary Liquidation - what we need to start

This is a list of what we will need to start the liquidation:

  1. Photo identification for the directors and any shareholder who owns more than 25%.
  2. The last 3 years full annual accounts.
  3. More recent management figures from your account system and a profit and loss and balance sheet to date.
  4. A list of your aged creditors including names, addresses and amounts due.
  5. Details of any in progress legal action such as a winding up.
  6. A list of any amounts due on loans, to the bank or on hire purchase/lease.
  7. A list of employees with their names, addresses, rates of pay, start date, normal hours and holiday entitlements.
  8. Details of any company pension scheme.
  9. Your VAT and PAYE tax references and the amounts owed in tax.
  10. Your company bank details and current approximate balance.
  11. A list of your company assets including details of those on finance.
  12. A list of other assets such as aged debtors or stock held.
  13. Details of any property owned or leased.
  14. A brief company history.

Before you start the process we can meet in person or by Zoom/Teams to discuss the process and any questions you have.

FIND OUT MORE

Liquidation can be a daunting process and you may have many questions. To give you a clearer picture and understand the process we have put together a Frequently Asked Questions (“FAQs”) page that can answer some of the questions you may have and shed light on the different procedures available. View all our liquidation FAQs here or click the links below to view the most popular articles:

You can also email me direct if you have any questions on david@kirks.co.uk

We have just worked with Kirks to complete the closure of our company. Everything went smoothly and professionally. I would recommend this firm and the staff who were very very helpful and quickly finalised everything. Thank you Kirks.
Carol Hill
David Kirk - Kirks Insolvency Call Back

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