If a company is struggling to pay its debts as and when they fall due and has become insolvent, the directors may decide to cease trading and place their company into liquidation voluntary before they are forced to do so by its creditors, this process is called Creditors’ Voluntary Liquidation (CVL).

A CVL is a quick and cost-effective way of formally closing down a company and complying with your duties as a director which can be funded using company assets such as cash at bank, sale of assets, book debts etc

Employees and potentially directors can make a claim from the National Insurance Fund and receive payments for outstanding wages, holiday pay, pay in lieu of notice and redundancy.

A Compulsory Liquidation is where a creditor has petitioned the court to make a Winding Up Order against the company, having previously presented the company with a Winding Up Petition. Upon the order being made the Official Receiver is initially appointed to commence the process of placing the company into liquidation. If your company is threatened with compulsory liquidation or has been issued with a winding up petition, do not delay, act immediately!

A Members Voluntary Liquidation (MVL) is the formal procedure for winding up and liquidating a ‘Solvent’ company. This means that the company has sufficient assets to cover its debts and everyone will be paid in full, with any remaining funds distributed to shareholders.

As from 1st March 2012 if a company undergoes an informal winding up procedure, HMRC will allow distributions up to a maximum of £25,000 to be treated as capital. Should total distributions exceed £25,000 then distributions will be treated as dividend income.

However, should the company enter into Members’ Voluntary Liquidation, the £25,000 limit will not apply and distributions will be treated as a capital receipt and have the tax advantage of being subject to capital gains tax rather than income tax

We are always clear to recommend the that the shareholders of a company take professional tax advice before undertaking an MVL.

Dissolving a company, also known as striking off, can be a simple, cost-effective way to close down a solvent company with no assets.

A company can be closed by applying to have it struck off the Companies House register if it hasn’t traded or changed names in the last 3 months or isn’t threatened with liquidation and has no agreements in place with creditors.

Creditors may object to a company’s application to be struck off the register and dissolved, and there is a period of six years after the date of dissolution in which a company can be restored by court order. Therefore, it is important when closing a company down to make sure that all creditors are dealt with in the correct way.

If your company is either being forced into compulsory liquidation or you are considering it as a voluntary option Simply Corporate can provide you with expert help and advice, call us today on 01282 20222420.