Latest news from S P Ford & Co. Limited - Leicestershire and London based Liquidators with nationwide presence

A Creditors’ Voluntary Liquidation, or CVL, allows the Directors and shareholders of a Company to take control of the negative situation they find themselves in.

With a CVL, the Directors choose a Licensed Insolvency Practitioner to act as their nominated Liquidator and work with him or her to bring the Company to an organised and controlled conclusion.

The CVL process will typically take less than a month and there is no Court involvement. A meeting of creditors will need to be held but it is, in truth, rare that creditors attend these with most seeing it frankly as a waste of their time.

Where the Company has physical assets, cash at bank or outstanding, collectible, debtors monies due in, the Liquidator’s fees will be paid by these without any cost to the Directors.

Having selected an Insolvency Practitioner that they feel comfortable with, the Directors will then, if they desire, be able to negotiate with him or her a sensible value for any assets which they may wish to purchase from the Company and, if they wish, they will be able to ensure that they are able to start up a new Company, without the baggage of debts carried by the existing one.

A Compulsory Liquidation is normally the result of a creditor, usually but not exclusively HMRC, issuing a Winding Up petition against the Company.

In Compulsory Liquidation the Court, or the creditors, will choose the Liquidator, with a government representative called the Official Receiver often fulfilling that role, especially where there are limited assets available.

With the Compulsory route the Company’s bank account will usually be frozen prior to the Court hearing and it is illegal for Directors to sell assets after the Winding Up petition has been issued.

Dissolution is a route by which a Company can be struck off the Companies House Register without first going through a Liquidation process. However, before a Company can be dissolved creditors must be written to and given the opportunity to object. It is rare that HMRC will allow a Company to be struck off where it has outstanding liabilities.

Even if the Company is dissolved without paying its outstanding debts it is possible for creditors to have the Company restored to the Register at a later date in order to pursue the debts once more. This option therefore fails to give the closure to the situation which Liquidation provides.

Where a Company has outstanding liabilities which, with the best will in the world, it is unable to pay, the option of Creditors’ Voluntary Liquidation provides the Directors with the best method of controlling the situation.

Where the Company has no assets and the Directors would have to pay for the CVL themselves, it is for them to decide how much they are willing or able to pay for the peace of mind which the Voluntary Liquidation option provides. At S P Ford & Co we are sensitive to such situations and happy to negotiate a sensible cost to make this option affordable wherever possible. Call Steve Ford direct on 07718 133 927 to discuss your options.

Is your profitable business being held back by historic debt/problems?

Often Directors who approach me for advice are confident that, despite their Company’s current problems, there is a potentially profitable business if only they were able to start over again.

In such circumstances the Directors sensibly ask the question as to whether or not it is possible, if they were to place the Company into Creditors Voluntary Liquidation, for them to purchase the assets of the Company themselves.

The simple answer is, in most cases, yes.

The insolvency legislation, founded upon the basis of encouraging a culture of enterprise, is in fact very supportive of giving businesses, and directors, a second chance. The alternative would be to present Directors with a choice between continuing to trade an insolvent company, with the inherent risk of personal liability, or ceasing to trade entirely with the consequences likely to include redundancies, loss of revenue for the Exchequer and a shrinking national economy.

The most important aspect to this is that a fair value must be paid for any assets, be they physical such as motor vehicles, plant and machinery or stock, or intangible such as goodwill.

In order to ensure that any sale to the Directors is valid an independent valuer would normally be instructed. The valuers that I deal with have a great deal of experience in insolvency valuations and are capable of taking a realistic, pragmatic view as to the price that should be paid in such circumstances, without prejudicing the interests of the Company’s creditors.

If you are a Director of a Company which is struggling to meet its liabilities, which is perhaps under pressure from creditors such as HMRC, but which you feel, with a clean slate, could be profitable, please call me direct on 07718 133 927 and I will be happy to discuss the options available to you.

 

Steve Ford

Director and Licensed Insolvency Practitioner

A Director can however be held liable for Wrongful Trading if he or she should have concluded earlier that there was no reasonable prospect of avoiding Liquidation. In that situation the Director(s) can be held liable for any new debts created beyond that point.

It is therefore imperative that Directors seek advice at the earliest possible opportunity. With the right advice it is usually possible to save the business in some shape or form and, providing you have acted in good faith and depending on circumstances, minimise or even eliminate any personal liability.

Possible warning signs which should lead a Director to consider taking specialist advice include:

If any of these circumstances apply to you and your Company please call our Licensed Insolvency Practitioner, Steve Ford, direct on 07718 133 927, for a free confidential chat. Alternatively, complete this contact form and Steve will give you a call ASAP.