If your company has debts that it is unable to pay when they are due to be paid, then your company is ‘insolvent’.
Sometimes companies can turn things around and come out the other side. However, a lot of companies cannot.
For an insolvent company which cannot turn things around, there are two ways to close the company via the liquidation process.
1. Creditors’ Voluntary Liquidation (CVL)
Deciding to voluntarily liquidate your company is generally considered to be the best course of action. This process enables you to keep your reputation intact and means that your business reputation won’t be adversely affected if you decide to engage in future business endeavours.
The director of a company can propose a Creditors’ Voluntary Liquidation (CVL) if the shareholders agree that the company is insolvent and pass a winding-up resolution.
Once a company enters a CVL it will stop trading and be liquidated or ‘wound up.’
A basic CVL is charged at a flat fee by us here at Clarke Bell and we assess a complex CVL case by case. Sometimes, the cost of your liquidation can be covered by the value of your company’s assets and we will always let you know if this is possible.
The process of a CVL is usually pretty straightforward and most of the time we do not need to engage in any face-to-face meetings. However, as Insolvency Practitioners we will need to conduct an investigation which is standard procedure and is nothing to be feared. All that happens is that we see what assets can be realised, determine if any other recoveries can be made, and review your books from the last six months.
Here at Clarke Bell we offer free, initial advice to all companies considering a CVL.
The other way of winding up your company is by Compulsory Liquidation.
2. Compulsory Liquidation
A Compulsory Liquidation is the most serious and detrimental way to close an insolvent company. Compulsory Liquidation can occur when a creditor (i.e. someone that you owe money to) attempts to recover the debts you owe them by forcing your company to close.
Firstly your creditor has to deliver a winding up petition to the court. If it is successful, your company will be closed and all its assets sold to cover the debts owed.
A creditor can only successfully force your company into Compulsory Liquidation if the debt owed exceeds £750 and you have ignored official payment demands. If a creditor has an unpaid County Court Judgement (CCJ) against your company they can also force you into Compulsory Liquidation.
If your business goes into Compulsory Liquidation, there are some serious ramifications for you and your business. Your future credit score will be adversely affected which is likely to seriously harm your reputation with lenders and banks. It would be very difficult for you to start a new business in the future and if you personally bank with the same establishment, it could affect your personal credit score too.
We strongly believe that a Creditors’ Voluntary Liquidation (CVL) is a much better option than a Compulsory Liquidation.
If you would like to discuss what options are available to you and your company, contact us for your free advice on 0161 907 4044 or [email protected]