Liquidation is the process by which any company is brought to an end and the assets and property of the company are realised and re-distributed.
If a Company is insolvent and cannot pay it’s debts as they fall due it can be wound up by the Courts. Any creditor with a debt in excess of £750 can
Issue a Winding up Petition. If a Winding up Order is made the Court may appoint an Official Receiver or one or more Liquidators.
Members Voluntary Liquidation
A Members Voluntary Liquidation is a legal process whereby a solvent company can cease trading.
For the company to qualify it must be solvent i.e. it’s assets are greater than its liabilities and it is able to pay it’s creditors as they fall due, as well as the costs of the liquidation itself.
It can be a tax efficient way of realising and distributing the assets of the company.
From March 2012, changes in legislation mean that under an MVL, shareholders funds can be taxed by capital gains tax on distribution over £25,000.00 rather than income tax. Meaning, less tax is paid by the Shareholders.
The Director/s must make a statutory declaration of solvency, that the company can pay all its liabilities in full plus statutory interest and the cost of winding up the company. This must be completed within 12 months of the declaration of solvency.
An MVL may be used for example when the owners wish to retire and have assets and property within the company, which they want to transfer into their personal estate.
Company Voluntary Liquidation
Trading whilst insolvent can result in the Directors becoming personally liable for a company’s debts. That is, if the company’s financial position is made worse by the Directors continuing to trade instead of putting the company immediately into liquidation.
In this situation the onus is on the Director to take appropriate advice to mitigate losses to unsecured creditors.
If you are considering ceasing to trade we can advise you through the stages of the liquidation processes.
* Concerned about what happens to the companies debts.
* Or you may have concerns over personal guarantees the directors may have given.
We can help and our initial consultation is free of cost, so you can find out the options open to you.
It may still be possible to rescue your business (see CVA) or there may be a way to cease any further losses and make a fresh start.