Key business liquidation processes

Izvor: KiWi

Voluntary Liquidation is a led by the director liquidation and is therefore less constrictive when it comes to the actual timing of the actual process to a Compulsory Liquidation .

In England & Wales the two main processes that company directors can voluntarily enter their business into are; Creditors Voluntary Liquidation (CVL) and Members Voluntary Liquidation MVL. It must be noted that personal liability of a company director will only exist if the director has signed a personal guarantee. The company is a legal separate entity and so will not affect personal liabilities.

Insolvent companies 

The appropriate correct liquidation for struggling companies is called a Creditors Voluntary Liquidation (CVL). This director-led route can be used for either full closure to fully dissolve or restructuring turnaround of a company. The process includes the following:

- Appointment of an Insolvency Practitioner to act as liquidator
- The liquidator will have certain powers under the Insolvency Act 1986 to realise and disburse of the company assets valuate and sell
- Another power function the liquidator will have is to distribute any available funds to creditors once all assets are sold.
business liquidation
Solvent Companies 

if your company can pay back all creditors in full within 12 months  do not want to go down a Strike Off route dissolving it efficiently or due to the tax benefits, then a Members Voluntary Liquidation (MVL) would be your chosen liquidation  the right route to go down. This is a beneficial  way of dissolving a solvent company  and to also receive healthy tax benefits on the shareholders’ funds if above £25,000. Some directors may ask why they need such a formal route  to dissolve  their company, but this can be explained in the following benefits list:

- Shareholder distributions will be classed as capital receipts rather than income and so will benefit from a lower tax code
- Entrepreneurs Relief may be attainable on shareholder funds which would reduce tax down to 10%
- Tie up all lose ends of a company which will give the director|s piece of mind

what happens to the directors?

business insolvency Liquidation depending on your circumstance does not have to mean the end of the world . Obviously dissolving your company can never be an easy decision to make, however if you are trading an insolvent company then it is the right decision to make. As company director you have an obligation to your creditors to trade solvently, and so as soon as insolvency is realised it is your liability to deal with it in the most appropriate way possible; by seeking expert advice.

If you have performed the director role in the correct manner then there is no reason why you could not take up this role again within another company. If however during investigations you are founded to have aided the insolvency then the possible implications could include fines or disqualification from your role If you have helped the company into insolvency. These are in extreme situations though and so if you have acted correctly there is nothing to worry about. These outcomes will only occur in severe cases of wrongful trading.

Further Advice

FA Simms & Partners are a firm of business rescue professionals and licensed insolvency practitioners. Established in 1978, 1000’s of small businesses have sought after their services to help them through their chosen process.

Contact today on: 01455 555444 or email: enquiries@fasimms.com to arrange a free consultation with one of our Insolvency Practitioners.

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