Liquidation
Dealing with a struggling business and deciding
upon the future of it, you and the employees can be daunting.
Ensure that you find an advisor who you can trust and has the
expertise to advise you on appropriate solutions.
When you speak to a professional advisor ensure that it is explained
why liquidation is the best solution in your circumstances - often
there are better alternatives.
If it is established that liquidation is the appropriate solution then
there is a complicated process to follow. Opposite are some
of
the main stages but it is not as simple as outlined and professional
advice is recommended at all stages.
If you want further free advice call us FREE on
0800 612 2635 or via
the web using the link below:
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The liquidation process
This is a highly abridged version of the Creditors Voluntary
Liquidation process.
Placing the company into liquidation
Often directors will obtain assistance in
this process from an Insolvency Practitioner who will ensure that all
matters
are appropriately dealt with.
- Initial
documentation
must be prepared to set up meetings
of creditors and shareholders. This
is
sent out to these parties giving just over 2 weeks notice of the
meetings.
- The business
will often be mothballed at this
stage and cease to trade. Employees
will
be made redundant and any valuable assets safeguarded.
- Information
will be gathered
as a report must be prepared
before the creditor’s meeting.
- A
report on the
financial situation of the company
(Statement of Affairs) and a report on the reasons for the liquidation
will be
prepared.
- The
meetings will be held where
the report and Statement
of Affairs is presented first to shareholders and then to the creditors. Creditors have the option
to ask questions
and vote for who will be liquidator.
Once
in liqudation
- The liquidator will inform
Companies
House of the liquidation.
- The
liquidator will sell
the company’s
assets and collect its debts.
- The
liquidator will also investigate
the
affairs of the company to ensure there was no wrong doing
prior to the
liquidation. A
report is also submitted
to BERR (formerly the DTI) outlining any issues identified.
- Once this is complete any
funds will be
used to pay
the liquidation fees
and then creditors
(dividend).
- Once
this is all completed the liquidation
will end.
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How long does liquidation last?
A liquidation can last a number of years however most are completed
within 1-2 years and a lot of this time relates to statutory waiting
periods for paying dividends and dealing with claims.
What
happens to the employees?
The
employees will normally be made
redundant when the business is closed - either before or immediately
after the liquidation.
Employees will
be provided with the relevant documentation relating to the creditors
meeting and may attend such meeting.
Once
the company has been placed into
liquidation, the employees will be sent a form by the Liquidator to
enable them to claim any
redundancy, arrears and holiday pay from the government’s National
Insurance
Fund.
More
details in this respect can
be found on the website www.financialcrisis.co.uk
How much does liquidation cost?
This will depend upon the circumstances
of the company and the amount of work the liquidator must undertake.
There are usually 2 elements:
- Fee
for assisting in the initial liquidation stages - i.e. putting the
company into liquidation and preparing the required papaerwork.
These fees are normally met out of the
assets of the company - i.e. once they are sold the liquidator is paid.
If
the company has no assets then the directors and shareholders may be
required to pay for the liquidation. Don't let this put you
off -
the relief of having someone dealing with the company is normally a
price worth paying.