When a business is no longer able to trade due to financial challenges and the shareholders/ directors want to close the business, often they will let just the company lapse and be struck off the register.
However, voluntarily placing a company into liquidation can also be a cost-effective way to exit a business. Liquidation brings your company’s life to an end in a legal and organised manner. It transfers the responsibility from the directors to the appointed liquidators.
Here are a few features of liquidation:
- Control of the company affairs transferred to liquidators
The liquidator now deals with creditor queries and realising the assets of the company. If there are surplus funds (after the costs of the liquidator) these are distributed to those out-of-pocket creditors.
- Legal actions are halted
Any legal action against the company is halted when your company is placed into liquidation. It also brings an end to the prospect of legal action (not including any personal liability or guarantees you have given for company debt). Creditors will not be able to initiate court proceedings against the company (except in exceptional circumstances).
- Leases are cancelled
Terms on lease and hire purchase agreements can be terminated upon liquidation. This means the company will no longer need to pay any future lease/rent payments. However, they will be entitled to claim as a creditor for already current or overdue amounts. The appointment of liquidator will not affect any separate personal guarantees or undertakings.
- Liquidator to handle staff
Any staff still employed upon liquidation will be handled by the liquidator(s). They will assess the business operations and decide whether employment will be maintained or ended. Staff can then claim for wages, holiday pay, redundancy, and any other entitlements. These claims are normally preferential and in priority to other general unsecured claims and paid if there are sufficient assets.
- No longer need to file PAYE and GST Return
Your company no longer needs to file PAYE, GST, or tax return once the liquidation is completed. The liquidator will deal with the Inland Revenue directly.
All this administration and important steps will be handled by the liquidators. This enables you to focus on your next steps and moving forward without the responsibility of managing ongoing queries and the unpaid company debts (if any).
If you are facing financial distress and wish to discuss your company’s circumstances and explore the options available, please get in touch with us today. Book a free 30-minute, no fee, no obligation consultation with our insolvency expert team or contact us at email@example.com or 0800 CLOSED.