If your company is struggling financially and you don’t see a way forward then liquidation might be the best option for you. Liquidation is a process that closes down your company and ties up all of its outstanding affairs. It stops creditors chasing you for debts, stops HM Revenue and Customs pursuing you for VAT, tax and PAYE returns, and it also stops Companies House sending you reminders. However, it can be an expensive process and directors should seek expert advice before proceeding.
The cheapest way to liquidate your company cheapest way to liquidate a company depends on how solvent or insolvent your business is at the time of closure. One of the main methods for doing this is a Creditors Voluntary Liquidation (CVL). During this process, the liquidator will sell the company’s assets and use the proceeds to pay off debts. The liquidator is under a duty to get the best price for the company’s assets, so they will usually obtain valuations from professional valuers before selling them.
It is possible to self-fund a CVL, which means that the liquidator’s fees can be paid from the proceeds of the asset sales. However, this will add to the overall time frame of the liquidation and is not recommended. In addition, it is worth remembering that there are other costs associated with a liquidation such as legal or accounting fees, the cost of the asset valuations and the brokerage charges involved in selling assets. If you cannot afford to pay these costs out of your own pocket then you may need to look at personal finance options.
Directors will also have to consider the impact of a liquidation on their own finances and personal reputation. A company’s liquidation will not only leave a bad mark on their credit report but it will also damage any personal guarantees they have given or brand recognition they have built up. This can make it hard for them to find employment in the future.
Another thing to bear in mind is that if you have an overdrawn director’s loan account it will become your responsibility to repay this once the company enters liquidation. This is the case whether the company enters a CVL or a Compulsory Liquidation.
Alternatively, if you want to avoid the expense of liquidation completely then you can simply wait for your creditors to push you into Compulsory Liquidation. However, this will have a significant impact on your credit rating and could potentially lead to a stringent investigation into your conduct while running the company.
If you are insolvent, it is essential that you seek expert advice as soon as possible to explore all of your options and determine the best way forward for your company. The longer you leave it the more debts your company will have and the harder it will be for you to secure financing in the future. You could even be made personally liable for these debts if you are not careful.