If the company is placed into one of the formal insolvency processes then it is for the liquidator or administrator to decide when is appropriate to dissolve the company. This will usually be at a time after the assets of the company have been realised insofar as they are able and a final dividend paid to the company creditors. This method assures creditors that the affairs of the company have been dealt with properly and they have received the maximum amount available to them.
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In certain circumstances a relevant party can apply to the court of the company to be restored to the register if they can show that there is value in doing so. The criteria is restricted generally to assets which have been missed or come to light after the dissolution which can result in a further distribution to the creditors. If this course of action is approved the previous liquidator or administrator is usually re-appointed to deal with the matter in hand and once this is completed the company is again dissolved. It would not be usual for the company to be put back into the stewardship of the directors if it was dissolved following a formal process. In the event that creditors a shortfall in their debts, these must be written off following the dissolution and unless they hold personal guarantees in their favour against directors (or other third parties) then they have no right to any form of legal redress to seek repayment. If however, as mentioned above, a personal guarantee has been signed by a director which has the effect of guaranteeing payment of a company debt to a specific creditor in the event that the company cannot afford repayment then that creditor is entitled to seek repayment of any shortfall from the guarantor and whilst the company will not be liable (as above) the guarantor will. It is extremely important that directors are fully aware of the consequences of signing personal guarantees in situations where the company becomes insolvent as the effect can be significant. There are also stringent provisions which must be followed in order for some classes of creditors to hold valid personal guarantees and it is also recommended that all guarantees are reviewed to ascertain their validity before any offers or repayment are made.
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The Insolvency Experts provide business debt advice and guidance, helping your company to take the best course of action if it is facing financial difficulties. Contact us online or speak to our specialists directly by calling us on 0300 303 8284.