When it comes to voluntarily closing your company, you have two main choices. You can either apply to have the company struck off, or you can place your company into a formal liquidation procedure known as a Creditors’ Voluntary Liquidation – or CVL.
Entering into a CVL does come with a price tag attached, typically in the region of £5,000, but in many cases it is well worth paying for this service if your company is in trouble. During a CVL, a licensed insolvency practitioner will be appointed to oversee the liquidation of your company and deal with your outstanding creditors. There are less expensive ways to close your company, such as by applying to have it struck off, however, this is a more informal method and it does have its drawbacks.
Firstly, striking off your company is typically only suitable for those with very little, or no debt. This is because creditors can object to you dissolving your business if you owe them money. Furthermore, even if your company is struck off, creditors can petition for it to be reinstated to the Companies House register at any time in order for them to collect the outstanding debt. When you formally liquidate your company, however, the company is closed for good. The appointed insolvency practitioner will ensure all the company’s assets are liquidated and will then distribute these funds between the outstanding creditors. Any debts which remain outstanding will be written off, and the company will cease to exist. Formal liquidation gives you a much more definite end to your company which also ensuring you adhere to your duties and responsibilities as director.
Another huge, but often overlooked, benefit to placing your company in liquidation is being able to claim director redundancy. Most people are aware that should a company enter liquidation its staff will be entitled to claim redundancy pay by way of compensation. However, it is less well known that directors are often just as entitled to claim for these statutory entitlements following liquidation. Striking off your company may be cheaper, but it also removes your right to claim for redundancy. Depending on your personal circumstances you could end up severely out of pocket by going for this cheaper option.
This is because while the average fee for liquidation is around the £5,000 mark, the average claim for director redundancy is £12,000. This means that not only could the redundancy money cover the fees for placing your company into liquidation, but also leave you with a sizeable amount which you can use however you like. It is therefore always wise to explore your potential right to redundancy before you make a choice as to how you should progress when it comes to closing your business.
If you are considering closing your company, speak to the expert team at Redundancy Claims UK. We can assess your eligibility for director redundancy and advise how much you may be able to claim. Should you have a valid claim, we can take you through the entire process from start to finish, maximising your entitlement at every point. To find out more about director redundancy, call our team today on 0800 063 9261.