What should you do if your company is facing closure?
The number of companies falling into insolvency are gradually increasing. The official number of registered insolvencies in July 2021 was 13% higher than the number registered in the same month in the previous year.
If your company is unable to pay what it owes, as it falls due, it is insolvent. It may be possible for the business to recover, but if this is not possible, you may wish to take steps to close your company. In these circumstances it is important to seek early advice, usually from a Licenced Insolvency Practitioner.
What happens if my company cannot pay its debts?
A company director must act in the best interests of the company and promote its success. If a company becomes insolvent, the interests of its creditors will be paramount and a director must then take steps to ensure assets are preserved, and the position to company creditors does not worsen.
The most important thing to do is seek early advice. By speaking to a Licenced Insolvency Practitioner you can work together to establish whether the problem is a temporary one, or whether more formal action is required.
If you do not take appropriate action, your company is likely to face enforcement action from creditors and could ultimately be forced into Compulsory Liquidation
How do I deal with closing my company?
In many cases you will need to consider whether the company should be wound-up (formally closed). Voluntary liquidation is an insolvency process formally known as Creditors Voluntary Liquidation (CVL) and is appropriate where 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’ of the company 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 in order to repay its liabilities.
What are the benefits of voluntary liquidation?
The CVL process:
✓ Allows employees to claim redundancy pay and unpaid wages from the Government
✓ Deals with creditor pressure and threats of enforcement action
✓ Provides directors with comfort in dealing with their choice of liquidator
✓ Is comparably cheaper, when compared to the likely costs of other insolvency processes
However, careful consideration must always be given to all options available.
What if my company is threatened with compulsory closure?
If your company is threatened with a winding-up petition (compulsory closure) then you must deal with this as a matter of urgency. If left unresolved, a winding-up petition will most likely lead to a winding-up order being made against your company. If this happens the company will be unable to trade and the Official Receiver will be appointed as liquidator.
How can we help?
Keywood Group is a Licenced Insolvency Practice and our team has extensive experience in advising business on their options, and dealing with company closure. Our friendly team will work with you to assess the options available and provide transparent advice about the implications of each option.
If you want further information, please contact us for a no obligation chat.