Liquidation is an effective method of closing both solvent and insolvent companies. For a solvent company, it acts as an efficient means for shareholders to extract profits from the company in the most tax-effective way. For an insolvent company, it is an effective way for dealing with the company’s debts which it is unable to pay. Liquidation is a great tool for bringing a company to an end, in the appropriate circumstances.
However, while knowing the details of the liquidation process is important, it is also important to know what comes after. In this article, Clarke Bell will discuss what happens after a company goes into liquidation, and what you should do afterwards.
What happens during a liquidation?
If you choose to put your company into liquidation, the first thing you must do is decide which method to use.
For solvent companies (i.e. ones which have no debts they cannot pay back), a Members’ Voluntary Liquidation (MVL) is often the best method to liquidate a company.
For insolvent companies (i.e. ones which cannot pay all their debts), a Creditors’ Voluntary Liquidation (CVL) is often the best solution.
While these two solutions are very similar in practice, there is some variation, and you must choose the appropriate solution for your situation.
Once you have decided which is the best option for your, you will need to appoint a licensed insolvency practitioner to help with the liquidation. A liquidation is a legal process which can only be done by an insolvency practitioner.
What happens at the end of a liquidation?
Once the liquidation is complete, your company will be wound up and struck off from the Companies House register. At this point, you will be free to pursue other ventures, with no existing connection to the liquidated company. If your insolvent company could not realise enough capital at the end of the liquidation to repay its creditors, the remaining debt will be written off. Your personal finances will not be affected – unless you have signed a personal guarantee as part of a loan agreement.
Shares in the company will also be made worthless, as the company they are connected to no longer exists. If you still own shares in the liquidated company, these can be deemed as a capital loss, assuming the company cannot reimburse you. These shares will then be removed from your portfolio.
How long should I keep records after my company has been liquidated?
Although your company no longer exists after liquidation, you must still keep hold of your records. These records must be kept for six years after the end of your company’s liquidation in most cases. If you have not kept your records and are asked for them, you could be subjected to significant consequences, including fines well into the thousands of pounds. If HMRC requests these records at any point during this time, you should promptly send them over to avoid any complications.
Can a liquidated company be reinstated?
Companies can be reinstated if you would like to reverse your decision, or if there are objections to the liquidation. Neither method is straightforward, so it’s best to carefully consider liquidation first, rather than dive in haphazardly and regret your decision later. These methods are:
- Court restoration – If your company was liquidated without repaying its creditors first, then it could be reinstated through the courts. Unpaid creditors are entitled to petition the courts to reinstate a dissolved company in order to receive the money they are owed. However, this is only an option if a company was liquidated improperly and without the approval of creditors, or is dissolved through a company strike-off. If you use a Creditors’ Voluntary Liquidation, creditors cannot petition the courts to reinstate your company.
- Administrative restoration – If you have second thoughts about liquidating your company, you can reinstate it through an administrative restoration. This is only an option if you liquidated your company voluntarily, however, and does not apply to compulsory liquidations. To begin the restoration, you must file an RT01 form with the Companies House, pay the appropriate fees, and supply the necessary documents. An administrative restoration can only be performed within six years of the liquidation, and can be costly in both time and money. As such, it’s best to wrap up any business with your company before liquidating it.
Can I set up a new company after liquidation?
If you have liquidated a company, you can still pursue new ventures whenever you like, and hold managerial positions as well. However, you should be aware of some rules and regulations surrounding setting up a new company.
The main rule you need to know regards the reuse of old company names. If you have liquidated a company, you cannot reuse the old company’s name in your new ventures. You must also not use any similar names, meaning you cannot use names that the public could connect to your old company. This rule must be followed for a period of five years from the liquidation of your old company. Failing to appropriately distance your new company from old ones can lead to severe penalties, including hefty fines and potentially a criminal investigation.
Let Clarke Bell help you
If you are considering placing your company into liquidation, let Clarke Bell help you.
We have more than 28 years of experience in helping companies close through the most efficient means available, and we can do the same for you.
Our liquidation fees are very affordable, and our staff are professional and friendly.
For a free, no-obligation consultation, contact us today and find out exactly what we can do for you.