If your company has entered insolvency and there is no possibility of returning to profitability, you will need to repay your creditors in so far as is possible and close down the business. A voluntary liquidation process can be costly, however, and you may struggle to afford the professional fees. Jason Elliott from Insolvency Practitioners Bolton looks at your options:
Company directors are often surprised to learn that they may be able to claim redundancy pay. The following sets out criteria that should be met to be eligible for redundancy pay as a director: • Have worked for the company for a minimum period of two years • Have in place a contract of employment whether it be written, verbal or implied • Work for a minimum of 16 hours per week • Undertake duties that are not merely advisory • Be owed money from the company – arrears of holiday pay, for example If your claim is successful this money could potentially pay for an IP to administer the liquidation process.
A creditor could wind-up your company
Liquidation via a winding-up petition from a creditor would result in the enforced closure of your company. HMRC are inclined to instigate compulsory liquidation procedures when a company gets into arrears with tax and NI, particularly if a Time to Pay arrangement has failed. They don’t need to have issued a CCJ or statutory demand prior to the winding-up petition, so the process is relatively fast. This is clearly not the ideal outcome for most businesses, but if your business really is in dire straits, it could help the issue of paying the IP. There are significant downsides however which include increased scrutiny of your actions leading up to the company’s insolvency by the Official Receiver (OR).
Investigations by the OR
The OR will investigate the reasons why your company has entered insolvency and will look back several years for instances of misconduct or unlawful trading. Further action could be taken against you if this or any ‘antecedent transactions’ are discovered. Antecedent transactions include making preferential payments, selling or transferring assets at an under value, and wrongful trading. Antecedent transactions can be reversed if they were made when the company was insolvent, or are found to have caused the insolvency, and assets can be recovered by the liquidator for the benefit of company creditors. As a director, you could face serious allegations of misconduct, as well as personal liability for some or all of the company’s debt if mistakes are discovered. In allowing a creditor to forcibly wind up your company, as a director, you effectively lose any influence over the liquidation process, including who is appointed as liquidator, and when the company is actually placed into liquidation. The other liquidation option, Creditors’ Voluntary Liquidation (CVL), allows you greater control over the closure of your business, with investigations into your conduct as a director being less aggressive.
It might be possible for you to be able to strike off your company at Companies House, a process known as company dissolution. The business must not owe any monies, however, as creditors can demand that it is restored to the Register of Companies at a later date to recover their money. If you are worried about the cost of closing your company and would like advice, The Insolvency Experts can help. We are insolvency specialists with vast experience of the liquidation process, and may be able to offer alternative courses of action which could result in your business being recovered and fees can be negotiated. Jason and his experienced Insolvency Practitioners Bolton are available now on 0300 303 8284 or via our contact us page.