Dealing with Company Closure
According to government statistics, the total number of company insolvencies in England and Wales last year (2021) was 14,048, an increase of approximately 11% on 2020, but 18% below the total number of 17,166 in 2019.
It is widely accepted that UK Government support throughout 2020 and 2021 has prevented a number of firms failing that would otherwise have failed. With those support measures at an end, we can reasonably expect insolvencies to return to pre-pandemic levels and possibly beyond.
So, what action should be taken if your company is facing financial difficulty?
What happens if my company cannot pay its debts?
A company director must always act in the best interests of the company. In insolvency, the interests of company creditors will be paramount, and a director must take steps to ensure assets are preserved, and the position to company creditors does not worsen.
If you fail to take the appropriate action, your company is likely to face enforcement action, and could ultimately be forced into liquidation. Even if you believe that the problems are only temporary, you should make sure that you understand the options available and be satisfied that the decisions you make are the correct ones.
What is Creditors’ Voluntary Liquidation?
Creditors Voluntary Liquidation (CVL) is usually an appropriate solution when a business has no viable future and must cease trading. The procedure can be instigated by the directors of an insolvent company, if the shareholders’ also agree that the business should cease trading.
Once it is resolved that the company should enter CVL, a Liquidator will be appointed by the shareholders and creditors, and company assets will be sold to repay its debts. The Liquidator must be a Licensed Insolvency Practitioner who will facilitate the formal wind down and will also prepare and file all of the necessary documentation, ensure that the winding up is fully compliant with the current legislation.
Benefits of a CVL
✓ Allows employees to claim redundancy pay and unpaid wages from the Government
✓ Prevents creditors from taking action
✓ Provides directors with comfort in dealing with their choice of liquidator
✓ Reduced costs, compared to the likely costs of other insolvency processes
As always, careful consideration must be given to all options available.
Help from a Licensed Insolvency Practitioner
Keywood Group is a firm of Licensed Insolvency Practitioners with offices in Birmingham and London, although we cover the whole of England and Wales. Our team has extensive experience dealing with businesses and our Insolvency Practitioner, Laura Anne Walshe, is fully licensed and regulated by The Insolvency Practitioners Association.
If you are concerned about the viability of your company please contact us for a no obligation assessment. We provide clear, transparent advice and work closely with all stakeholders to reach the best possible outcome.
