Top tips for winding up a companyTop tips for winding up a company
If you are the director of a limited company and believe that liquidation is a realistic prospect in the near future, don’t just wait for the inevitable to occur.
Acting early could save you a whole load of hassle in the future, not to mention limit the losses incurred.
If you are looking to maximise the value of your company’s assets and close your company in the most pain free cost effective way possible, get in touch with a professional insolvency practitioner as soon as possible.
They will be able to advise you on the best route forward and help guide you through what could otherwise be a stressful and confusing process.
Prior to closing your company for good, there are a few things that you can do to reduce the pain of the process and ensure the best possible outcome for all involved.
Here are 7 top tips for winding up a company:
1) Work out your exit strategy
There are several different ways that a company can be dissolved, including both voluntary and compulsory liquidation.
The best option for your company will depend on its financial status, any money due to creditors, and whether or not you are solvent or insolvent.
If you are merely experiencing financial difficulties and directors believe there is a route to return to profitability in the future, you may be able to renegotiate with creditors or restructure liabilities to give yourself some breathing room.
If this is not possible you should choose the liquidation method that is most cost-effective in order to act in the best interests of creditors, shareholders, and employees.
2) Understand the nature of money owed
If your company has an agreement with a creditor and is unable to pay, the liquidation process will help to settle debts through the sale of assets.
Once the company is dissolved, loans may no longer be due as a result, however, if liabilities are personally guaranteed, that is to say that you took out a loan based connected to you as an individual as well as the business, you may be held liable for this debt even after liquidation.
3) Ensure a majority decision
By far the easiest method of liquidation is voluntary liquidation where the company’s directors and creditors agree that the company should be wound up.
For this process to commence you need a majority of shareholders, over 75% to agree.
Ensuring this is the case will take a huge amount of hassle and potential court appearances out of the process and lead to a faster resolution.
4) Get your tax in order
If you have not finalised your tax position prior to applying to have your company removed from Companies House, there is a chance that HMRC will object and the process will be delayed.
There are certain tasks that must be carried out to abide by the HMRC guidelines regarding company dissolution so make sure to check these out.
5) Avoid name changes
One of the quickest ways to dissolve a company is simply applying to have it struck off through the DS01 form.
However, this is not possible if the name of the company has been altered in any way in the last 3 months.
Having to wait even an extra few weeks at this stage could see you enter serious financial difficulties and be hit with a winding up order that drags on for months so try not to change your company name too often.
6) Fast is not always better
It can be tempting to simply opt for the process of dissolution that is fastest so you can move on from the business and get on with the rest of your life.
However, sometimes the quickest route is not always the best route.
If you are considering dissolving your company, Members’ Voluntary Liquidation may be a better route than simply having the company struck off as this process sees funds treated as capital rather than income, resulting in lower taxation and a more cost-effective outcome.
7) Settle debts
If you simply wish to dissolve your business, not as a result of insolvency or financial difficulties but simply to move on to something else, make sure to settle any debts the company may have first.
Creditors have the opportunity to submit claims during the strike off process and if it is found that they have a valid case, the company may be reinstated to answer for what it is due.
If you have unpaid debts and there is no plan that could see the company meet repayments in the near future, liquidation may be the only real option.
This involves the appointment of a liquidator who will sell off any remaining assets that the company has and these funds will be distributed among the creditors.