There are many different debts that a business is likely to face in its lifetime including: National Insurance, PAYE, corporation tax, overdrafts, bank loans, property leases, rent, VAT and supplier costs.
As Licensed Insolvency Practitioners, we often get asked: what happens to debts when a business closes?
If a company is able to pay off its debts (i.e. it is ‘solvent’), then it has a legal duty to do so before it closes down.
A Members’ Voluntary Liquidation (MVL) is a very tax-efficient way to close a solvent company. Closing your solvent company formally with the MVL process could save you thousands of pounds and will mean that nothing unexpected will arise from the company in the future.
You will need to appoint an Insolvency Practitioner (like Clarke Bell) to deal with your MVL.
For more details about how we can help you with an MVL click here to find out the possible benefits to you.
If a company is unable to pay off its debts (i.e. it is ‘insolvent’), directors can propose a Creditors’ Voluntary Liquidator (CVL) to close the company formally and acknowledge their legal duties and responsibilities.
In a CVL, where it is possible any assets of the company will be sold by the liquidator to pay off some or all of the outstanding debts.
Even when a company has no assets it can still enter into a CVL.
Where there aren’t enough assets to pay off all the company’s debts, the creditors (i.e. the people who are owed money) will have to write-off some or all of the amounts they are owed.
When a director has taken out a Personal Guarantee (as is often the case for small business owners) they need to understand the implications of their PG when their company is insolvent
A CVL is a common way for directors of an insolvent company to acknowledge their legal responsibilities to their creditors. It also enables the directors to have a fresh start.
Clarke Bell are Licensed Insolvency Practitioners and business re-start specialists.
We can give you (free) advice if you are looking to close your company and what to know how to deal with any company debts.
Whether your business is able to pay off its debts or not, we can provide you with a legal and correct way to close your business. We can help you ensure that you, your creditors and your shareholders the best possible outcome.
For more information, contact Clarke Bell now on 0161 907 4044 / [email protected]