Dealing with Company Closure
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?
Usually, a company director must act in the best interests of that 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.
In these circumstances you must take steps to arrange for the company to be formally wound up. You can do this on a voluntary basis, by taking steps to place the company into Creditors’ Voluntary Liquidation.
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.
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’ 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.
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
However, careful consideration must be given to all options available.
At Keystone Recovery we understand the pressure facing directors when their business is experiencing financial difficulty and are available to provide free and transparent advice. If you require any further information please do not hesitate to contact us for a no obligation assessment.