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Closing a Company via Dissolution
A Dissolution is an application to have a limited company struck off at the registrar of companies. You must not have traded for three months prior to the dissolution and all Creditors must be informed of the intention to strike off. Creditors are given three months to respond to the knowledge that the company is going into dissolution and if none challenge the dissolution the company is struck off at Companies House. A creditor can, however, apply for the company to be reinstated up to 20 years after the dissolution and this is why it is not always ideal for certain companies.
Dissolution can be a very useful solution despite this depending on the situation, if managed correctly, so get in touch to see if this is relevant to your situation.
Creditors Voluntary Liquidation (CVL)
A Creditors Voluntary Liquidation is initiated by a company’s Directors and the purpose is to close the company usually due to financial problems. The Creditors Voluntary Liquidation has to be approved by the company’s shareholders and once agreed - the assets within the company are usually sold to repay all or part of the liability to the creditors, liquidation fees and costs. As your choice of Insolvency Practitioner can be challenged by an angry creditor - selection of an efficient and reputable Insolvency Practitioner to carry out the company liquidation services is essential. That’s where we can help as we have a network of Insolvency Practitioners to choose from across England & Wales.
When a company becomes Insolvent (cannot pay its bills when due and/or its liabilities outweigh its assets) all kinds of complications arise and the situation can be like walking through a legal minefield. Any Director has to take on even more responsibility for his/her decisions than normal and whilst being aware of this most directors then seek help – but don’t know what to do. A common mistake is to contact an Insolvency Practitioner in the first instance and this is often not in the directors best interests.
Even though an Insolvency Practitioner is appointed by you they have a duty and responsibility to the creditors. For this reason many directors are wise in making sure that all ‘loose ends’ are tied off to ensure the directors and their personal assets are protected before entering the liquidation process. A simple example is a Personal Guarantee with suppliers or the banks. Your chosen Insolvency Practitioner is not allowed to advise you once engaged as there would be a ‘conflict of interest’ with the creditors. As your Insolvency Practitioner will tell you in writing Personal Guarantees will be your responsibility and not theirs. So who do you turn to? That’s what we do at Jameson Smith & Co aside from appointing the most appropriate Insolvency Practitioner in you area. We will work with you to ensure all of your affairs are in order and tactics are in place before entering the liquidation process. You (The director and your family) are our number one priority.
NB: Jameson Smith & Co have a network of Insolvency Practitioners to choose from to suit your circumstances, your budget and we also ensure that they are geographically smart. Once we have assessed your requirements we will recommend and introduce you to the most relevant Insolvency Practitioner for your company’s situation.
A compulsory liquidation is usually initiated by the creditors via the courts using a Winding-Up Petition to close the company down. According to The Times the HMRC were responsible for around 43% of all Winding Up Petitions in 2008/9. If the creditors are successful in Winding-Up the company - the Official Receiver is automatically appointed to obtain the best return for the company’s creditors and is also charged with investigating the company’s previous trading years as well as the way in which the directors conducted their company affairs. Directors can appeal against the petition, however, if you have received a Winding-Up Petition and you wish to carry on trading then please contact us immediately on 08000 746 757 or have a look at the ‘Carry on Trading’ section as you will need immediate assistance with your situation. Once you have read the brief explanation of the options available contact us and give us an outline of your situation, we will be happy to listen and advise you on what to do without charging a single penny. We have helped many businesses completely free of charge.
There could be serious implications dependent on your individual circumstances and whether you are a director or a sole trader. Sole Traders personal assets are already at risk but for directors the limited liability status may become void and personal assets made vulnerable. Winston Churchill said “…there is more lost by indecision than by the wrong decision…” What have you to lose simply pick up the phone and call 08000 746 757 or email:
Members Voluntary Liquidation (MVL)
This route is for directors and shareholder who typically are coming towards retirement but the company must be viable. In fact you must make a solvency declaration and the MVL is subject to the Insolvency Act 1986. An MVL is used to wind up a solvent company and used as a means of bringing a company to a formal end and distributing its surplus assets. This can be a tax effective route and is undertaken either through payment of a final cash dividend or by what is known as distribution in specie of its assets directly to its shareholders.
The MVL allows shareholders to extract their investment in a tax efficient manner benefiting (where applicable) from retirement, taper and other potential tax relief’s that may be available.
The MVL requires the preparation of a formal Declaration of Solvency which must be produced at a date within 5 weeks of the resolution to wind up. The Declaration of Solvency takes into account the company’s assets and liabilities as evidence of its solvency and ability to repay creditors together with statutory interest within a maximum of 12 months. This statement should not be made lightly as if it is false it is punishable by fine and/or imprisonment.
The directors have to be absolutely certain of the solvency of the company - taking into account both prospective and contingent liabilities. It is not unusual for a company to start an MVL and discover it is in fact insolvent and in this case the liquidation will be converted to an insolvent Creditors Voluntary Liquidation (see above for more information on a CVL).