If you need to shut your company due to debt or a dire financial situation, you’ll in all probability have heard of liquidation or liquidating your company.
However, a liquidation can price some huge cash, generally 1000’s of pounds.
However what when you don’t have any money and neither does your company? We clarify liquidate a company that has no money or property.
Firstly, what’s liquidation?
To liquidate a limited company actually means to unload any property (things the company owns, like inventory, computer systems, desks, buildings, and so on.) to show them into money to repay the people the company owes money to (creditors).
So is it potential to liquidate a company free?
Yes, however, it is not so simple as it appears.
Within the situation above liquidating the property of the company would additionally pay for the liquidator’s (Insolvency Practitioner) charges, due to this fact basically costing the directors nothing. That is helpful as result of the associated fee to liquidate a company can typically run into the thousands of pounds.
In some liquidation instances, the company director might also be capable to claim for redundancy, provided they’ve been on the PAYE scheme.
If there’s any redundancy cash this may also be used in the direction of any liquidation prices. By utilizing cash raised from selling assets and redundancy claims you’ll be able to primarily liquidate a company free as you aren’t paying for the liquidation with cash out of your checking account.
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The right way to close a company when there aren’t any assets or funds for a liquidation
However, in some cases, there won’t be sufficient, or certainly any, property to sell, or any redundancy cash to assert, due to this fact there will likely be no money to pay for an Insolvency Practitioner, if that is so then liquidation will not be possible and you have a few decisions which will obtain the identical end result.
1. If your company has no money owed
If you simply need or want, to shut down the company, and there aren’t any debts or any property to liquidate, then you’ll be able to dissolve the company and have it struck off the Companies House register.
This process can sometimes take about 3 to six months and you’ll have to put collectively and current cessation accounts so as to do that.
NOTE. If your company does have assets then, relying on the quantity, a Members Voluntary Liquidation could also be the most effective route to make use of.
2. If your company does have debts
If the company does have money owed however no assets then there’s one other route that can be utilized. This process clears any debts and permits for the corporate to be closed, which is known as Dissolution. It has the identical impact as a liquidation however often prices far much less.
The Dissolution process is predicated on the advantages of utilizing Sections 1003 to 1008 of the Firms Act 2006 (previously Part 652 of The Companies Act 1985) which can be found to limited corporations.
If you happen to observe this route you need to be certain that all collectors are informed and the financial place defined to them. You also need to invite the creditors to petition for the winding-up of an organization.
Additionally, you will have to just remember to inform all shareholders, administrators, staff, and trustees of any pension fund.
The good thing about Dissolution is that you’ve addressed your statutory duties of informing your creditors of the financial position and, as you’ve additionally reported the matter to the Registrar of Firms, you can’t later be personally fined by the Registrar for any later failure to deliver accounts and annual returns.
The primary drawback is that the method must be carried out correctly with paperwork and so on. being filed on time and within the right order.
Additionally, it’s particularly necessary to watch out about your actions and accounts whenever you realize your company is buying and selling whilst insolvent.
For instance, when you try to sell off all property in an unbiased sale for a worth that’s far under market worth you possibly can be accused of wrongful trading.
As well as, you shouldn’t take out any credit or loans whereas the company is bankrupt, as you may be held personally liable for these debts if you’re found responsible for wrongful or fraudulent trading.