If you own a limited company and are looking to close it down, you may need to consider a company liquidation process. There are processes available for both insolvent and solvent companies and this article covers both options in detail to help you decide which service your company may need.
Services for Insolvent Companies
An insolvent company means that the liabilities outweigh the assets of the company, and that the company is failing to pay their creditors on time. If this sounds like your situation then the process of a Creditors’ Voluntary Liquidation (CVL) may be the right liquidation service for you and your business.
A Creditors’ Voluntary Liquidation is the formal process of the directors voluntarily bringing their business to an end with the help of a Licensed Insolvency Practitioner. A CVL process can either offer the directors the opportunity to purchase back the assets of the business and goodwill in order to re-open the business within another company, or to fully dissolve the company.
This director-led process has 3 key meetings and 5 resolutions that need passing before the company can enter the liquidation process. 75% of shareholders must also agree to place the company into liquidation in order for the process to begin.
Once the company has entered into liquidation it will be down to the Insolvency Practitioner to sell any assets of the company and distribute any available funds to creditors. They will also resolve any issues related to creditor claims and handle all relevant paperwork throughout the entirety of the process.
Services for Solvent Companies
A solvent company means that the company has enough funds to pay all their creditors in full within a 12 month time period. If a company also has over £25,000 worth of shareholder distributions to make, then a Members’ Voluntary Liquidation (MVL) may be the right liquidation service for you and your business.
A Members’ Voluntary Liquidation is used to close down the affairs of a solvent company correctly and efficiently. It helps to ensure that all “lose ends” are tied up before submitting their dissolution paperwork to Companies House.
If there are shareholder reserves of over £25,000 it also enables these funds to receive low tax rates; which can go down to around 10%. Since the change in legislation in 2012, the only way to receive capital tax treatment on shareholder distributions over the sum of £25,000 would be via the use of an MVL process. Since this year, MVL’s have increased in usage considerably.
Which liquidation service is right for you?
- As you can read from the above, if your company is suffering from insolvency then a CVL process can help dissolve it efficiently or help you as a director re-start your business within a new company.
- If your company is solvent but it has just come to the end of its trading life, then an MVL may be the right process for you if you have £25,000 or more in shareholder distributions to make.
Whichever process you think you need, the best first step is to discuss your situation with a Licensed Insolvency Practitioner. Our Practitioners offer free initial advice and a free face-to-face meeting at a location convenient to you. Call us today on: 01455 555 444 or email us your query to firstname.lastname@example.org.