Before we discuss the different processes of closing a company, you must first decide if your company is solvent or insolvent.
If your company is solvent then this will mean that all of the company creditors will be paid in full and that the company’s assets outweigh the company’s liabilities.
If your company is insolvent then this means that the company is struggling to pay their invoices as and when they fall due and their liabilities far outweigh their assets.
Depending on which scenario your company is in will determine which liquidation process is most suitable for you when deciding on how to close down your company.
It is also a good idea to seek advice from a Licensed Insolvency Practitioner as these are the only people who legally have the power to be appointed as Liquidators and manage the liquidation process for you.
Liquidating a business
-Via a Members’ Voluntary Liquidation (MVL)
If you have determined that your company is in fact solvent, then you will be looking to find more information on closing a business via the MVL process.
This liquidation process is most suitable for closing a company that has over £25,000 of shareholder reserves that need to be distributed. This is because an MVL process will treat these distributions as capital receipts not income and therefore will provide lower tax rates on the distributions.
We must note however that we are not tax experts and so this advice should be sought before you contact an Insolvency Practitioner to proceed with the MVL process.
There are 4 key stages to an MVL process:
- Directors Meeting
- Declaration of Solvency
- General Meeting
- Final Meeting
Liquidating a business
-Via a Creditors’ Voluntary Liquidation (CVL)
If you have determined that your company is in fact insolvent, then you will be looking for more information regarding the CVL process.
This process of closing a company is a director-led process. This option can help a company fully dissolve or it can be used as a business rescue process by allowing the company director to purchase the goodwill and assets of the business in order to start over within a new company.
The liquidator appointed will sell any assets of the company in order to realise funds to distribute to creditors. Independent evaluations will be taken in order to sell the assets for the best price available. Creditors will be paid in the order which is laid down in the Insolvency Act 1986.
There are 3 key stages to the CVL process:
- The Directors Meeting
- The General Meeting
- The Creditors Meeting
What to do next when closing a business
Now you have determined that you want to proceed with closing a company the next step would be to talk to a professional advisor in order to confirm the best action for you and your company to take. Talking through your situation with a professional adviser may give you more options then you first thought.
Liquidation.co.uk provides a free confidential helpline and also a free initial meeting to make sure that you get the best advice and the most appropriate advice for you and your company.
Call us now on 01455 555 444 or email us your query to firstname.lastname@example.org.