If your business is facing financial decline and you’re not sure how to proceed, you may be considering closure in order to minimise losses. This is generally achieved using a liquidation process called Creditors’ Voluntary Liquidation (CVL), which writes off any unpaid debts at the end of the process, and is administered by a licensed insolvency practitioner (IP).
Some directors mistakenly choose to use the company dissolution process, however, knowing that money is still owed to creditors. This is often because the procedure is relatively straightforward and inexpensive, but the full implications are not always understood.
Company dissolution is not available for companies subject to insolvency proceedings - such as a winding-up petition - and is likely to be objected to by creditors (such as HMRC) if there are outstanding liabilities.
Even if no creditors object at the time of application, a company can subsequently be restored to the register if one or more of its creditors object further down the line. Company restoration following dissolution can result in additional liability and filing penalties in some instances, and the company is treated as if dissolution hadn’t occurred. In contrast, once a company has undergone a formal liquidation process and is closed down, it is far less likely to be restored.
By entering into a Creditors’ Voluntary Liquidation, you may be eligible to receive redundancy pay in the same way as your members of staff. This can relieve the considerable financial pressure placed on the business, yourself, and other directors, by covering the liquidation costs and potentially leaving some left over for you.
Company dissolution offers no such entitlement to redundancy, and can, in fact, result in serious financial issues for you on a personal level if you’re held accountable for the company’s debt at a later date.
When a company is liquidated using a CVL, business assets are sold for the benefit of creditors, but any debts remaining are written off. This provides closure in more than one sense – on a practical and financial level, but also on an emotional one for directors.
Redundancy Claims UK can help to establish your eligibility for director redundancy, and guide you through the whole process from start to finish. Contact our team today to learn if you qualify, and how much you may be entitled to claim. RCUK are Authorised and Regulated by the Financial Conduct Authority. Authorisation No 830522. You can check our registration here.
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If you are looking to close your limited company, you may have attempted to strike it off by submitting a DS01 form to Companies House. This process is also sometimes referred to as dissolving or company dissolution.
A Creditors’ Voluntary Liquidation (CVL) is an official procedure whereby a company’s assets are liquidated in order to pay creditors. It’s typically initiated by directors when their company becomes insolvent and there is no hope of business recovery.
Redundancy claims are a very professional company, Caroline who is dealing with our case is friendly, compassionate and very clear in explaining everything during this difficult time. The service we have received has been amazing, Thank you.Tina Hill Director of a professional services firm