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Liquidation

Creditors Voluntary Liquidation

This is the process of liquidation where the directors decide they have to close the company and go into liquidation. They are not forced into it hence the term voluntary but it may not feel very voluntary.

It 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 actually happens?

If you contact us we will prepare all the forms to put your company into liquidation as soon as possible.

We will make sure your employees are helped to make their claims from the UK Government Redundancy Fund and we will also write to all your creditors. 

If there are premises to close or assets to sell we often appoint a local agent or auctioneer to help with that.

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.

Do not worry if you only have part of this – send me what you can. If you want a meeting we can do this by Zoom or Teams to discuss the list above or email me any question.

 

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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