The formal insolvency process of Liquidation is used for the sole purpose of closing a company, however, you may not actually be aware of what you can and can’t do after your company has been liquidated.
At The Insolvency Experts, we can guide you on your next business venture if your previous business had become insolvent.
What happens at the end of a company liquidation?
Towards the end of a Company Liquidation process, the primary concern is selling the assets and repaying any creditors and contributors. Once all the assets are sold and the company is closed down, it will be struck off the Companies House register.
After the liquidation process, the liquidators will conduct an investigation to determine whether the directors were guilty of any wrongful or fraudulent trading whilst the company was insolvent.
Find out more on liquidation using our comprehensive company liquidation guide.
What happens to assets after liquidation?
When a company is liquidated, the assets are sold and the profits are used to repay any creditors and shareholders.
The reason why the assets are sold is because when a company enters liquidation, it typically does not have enough capital to pay off its debts.
Should a director be keen to keep an asset, for example if it holds sentimental value, they will be allowed to purchase them off the insolvency practitioner. However, this must be at the going rate which is established by an independent valuer.
What happens to shares after liquidation?
Once a company is liquidated, the shares become worthless. This means for investors, they can declare their share as a capital loss and it can be removed from their portfolio.
If a business has enough money to repay the creditors and the shareholders, it can; but it is very rare for the shareholders to receive any capital from the sold assets.
How long to keep company records after liquidation
In general, company records must be retained for at least six years from the finishing date of the accounts after liquidation.
Severe penalties could be imposed for businesses that fail to produce business and/or accounting records when requested by the HMRC. Fines can potentially be as high as several thousands of pounds, if not more.
Unpaid wages after liquidation
When a company goes into liquidation, employees become creditors of the company for:
- Unpaid wages
- Holiday pay
- Sick pay
- Any other outstanding amounts.
This means the employees will get their unpaid wages via the sale of assets.
Redundancy after liquidation
As soon as a company enters liquidation, eligible employees can claim for redundancy pay, as well as other statutory entitlements.
Payment or part payment of a redundancy may come from the liquidated business if there are sufficient funds from the sales of company assets. Employees are typically a priority for repayments during liquidation, just falling behind the liquidation process costs and secured creditors.
If redundant employees do not receive their full redundancy payments from their employer, they can claim from the National Insurance Fund.
Can a company be reinstated after liquidation?
Yes, you can reinstate a company after liquidation.
There are two ways to reinstate a company, either by applying for administrative restoration to Companies House or by an application to the court.
If a company was dissolved voluntarily, it can only be restored by the court.
Applications to restore a company must be made within six years of the company’s dissolved date by either a former director or member of a limited company.
Reinstating a company can often be time consuming and costly, so if you want to go down this route, you should seek specialist legal advice from the offset.
The process involves filling out a RT01 forum with Companies House, alongside filing fees, and any outstanding documents.
Once the administrative process is complete, you could be entitled to a discretionary grant. This only applies if you were a shareholder of the firm and wish to claim back some money.
A court order may be the route to take if you were either a creditor or had a contractual agreement with the company and it owed you money.
A successful court restoration means the dissolved company will be restored temporarily so assets can be recovered or a claim can be pursued.
This is a viable option if:
- You worked for the company;
- You did business with it;
- It owed you money when it was dissolved; or,
- you were a director or shareholder when it was dissolved.
If you choose court restoration, you will need to prepare a supporting witness statement for the court, as well as paying a £280 fee. The court will issue the claim, which is then required to be served upon the Registrar of Companies and The Treasury Solicitor. A Bona Vacantia waiver must also be obtained.
After this process, the court will then determine if the company should be restored and accordingly make an order, which must be served on the Registrar of Companies.
Setting up a new business after liquidation
There are a few general rules that you should be aware of when setting up a new business after a previous one is liquidated.
Failing to comply with the rules and regulations could result in criminal action being taken against you, so it’s always best to know what you can and can’t do before you set off on your next business venture.
Can I be a director of a company after liquidation?
Yes, you can be a director of a new company after liquidation. There is nothing stopping you from setting up a new business after a previous one has gone into liquidation.
However, if HMRC were a substantial creditor and this wasn’t the first time one of your companies had gone into liquidation, they may insist on a VAT or PAYE deposit to protect their position.
Can I reuse a company name after liquidation?
You can set up a new business after liquidation, however, it cannot have the same or similar name as the old liquidated company for a period of five years from the date of the liquidation. This is to mitigate any confusion for creditors of the old company.
Having the same or similar name as the old company is known as passing off, and it can lead to criminal action against the director.
They may also be held liable for all of the debts of the new company if it goes into liquidation.